These days, credit cards are used by Americans of all ages and from a wide range of backgrounds in order to provide a financial lifeline or an emergency backup. They are also used for ease and convenience by many. Even younger people such as students are now able to get credit cards so that they can enjoy the ease of convenience having a credit line and being able to use plastic.
However, a recent report has suggested that many younger people lack awareness and knowledge when it comes to credit card use, and this is something that poses real financial dangers to them. The research was carried out by Experian, which surveyed a number of younger consumers on credit cards and credit ratings.
Many mistakes leading from lack of knowledge
According to an official from Experian, this lack of knowledge that many younger consumers have when it comes to credit cards is resulting in them making costly mistakes when it comes to using plastic. She said that there were a number of common mistakes and problems that were stemming from this lack of awareness and that these could ultimately affect younger cardholders over the longer term as well as in the short term.
One of the mistakes that younger people tend to make when it comes to using credit cards is not even knowing the credit limit on the card. This means that they are more likely to exceed the credit limit on the card, which in turn will result in costly fees being added to their balance as well as a black mark on their credit file. Around 30 percent of those polled said that they had maxed out their cards because they did not know what the limit was.
Another key issue that has arisen from this lack of knowledge is failure to understand how interest rates and charges work. Without this knowledge, younger consumers are more likely to be hit with costly interest charges, which will bump up their balance and increase their debt levels. Many did not know that they could avoid interest by paying off their balance in full and others did not know that there was a higher charge for cash advances than for purchases.
An expert from Experian said that younger consumers needed to be aware that failing to look into the finer details of credit card use could have a profound effect on their credit score, which in turn could impact on their financial future. However, she added that many of those polled also had a lack of awareness when it came to how credit scoring worked and the importance of maintaining a good credit rating.