Despite the number of households and consumers trying to lower their various debt burdens, credit card debt remains to be a prevalent issue across the United States today. The latest findings could prove to be more troublesome for a growing number of Americans, who have on average $15,191 credit card debt.
In addition to lacking financial literacy, a new survey has found that complicated financial products that are given to consumers with tiny print are costing Americans billions of dollars each year. By carefully researching and performing due diligence on any financial product can save consumers a large sum of money, according to a new study by MagnifyMoney.
The survey found that more than one-third (35 percent) of Americans have gone into overdraft this past year – an average of 2.5 times in the last year. The two most popular reasons for going into overdraft are forgetfulness (53.2 percent) and short of money (46.8 percent). The average overdraft and Non Sufficient Fund (NSF) fees are $225 per year.
“The average bank overdraft fee at a large, traditional bank is $35, and extended overdraft fees make the cost per incident even higher, so consumers are paying hundreds of dollars in unnecessary overdraft fees,” said Nick Clements, co-founder of MagnifyMoney, in a statement. “In fact, Americans spend over $30 billion a year on overdraft fees. New alternatives exist that could cut those fees by over 70%, putting more than $20 billion back into American pockets.”
Nearly half (42.4 percent) of American consumers still carry credit card debt and carry an average balance of $10,902. Furthermore, the interest rate they’re paying is obscene: more than three-quarters (75.7 percent) have an interest rate of more than 15 percent.
One method that consumers could cut down on their enormous credit card debt levels is a balance transfer, a method of transferring a balance from one account into another. This product allows a customer to slash their interest rate to zero percent for a short period of time.
The other big issue in the U.S. today is the paucity of savings. The national savings rate over the past decade has been between three and five percent. For those that do save, they’re receiving next to nothing in interest. The survey found that close to three-quarters (73 percent) of Americans receive rates close to zero, but those who shop around on the financial markets, such as utilizing an online savings account or a high-interest savings account, could very well earn greater rates of return.
“Most of us do not realize how much money we are leaving on the table, and how easy it really can be to switch products and save money,” noted Clements.
He later added: “Internet banks will pay 0.9% interest on basic savings accounts, compared to 0.01% at traditional banks, so switching from a traditional account to an online account could earn consumers an average of more than $250 a year.”
The survey was conducted with 1,435 adult Americans in Apr. 2014. It did not report the margin of error.
Total consumer debt in the U.S. is close to $17 trillion: $13.3 trillion in mortgage debt, $1.2 trillion in student loan debt, $860 billion in credit card debt and $110 billion in auto loan debt.
