Majority of credit card users are unaware of the interest rate they pay (NI)
Posted on: 26 Jan 2022
New survey carried out by Irish League of Credit Unions finds majority of credit card users are unaware of the interest rate they pay
68% of consumers own a credit card
61% don’t know what interest rate they pay
57% of adults agree that people in Northern Ireland rely too much on credit cards for making purchases
64% of respondents believe people in Northern Ireland are now more dependant on credit cards due to the COVID pandemic.
A survey carried out by the Irish League of Credit Unions (ILCU) into the spending habits of credit card users in Northern Ireland has revealed that 61% of respondents don’t know what interest they are paying on their credit card. Nearly two thirds of those surveyed (68%) own a credit card with nearly half (48%) saying they use it to pay for ad hoc purchases each month.
The survey results revealed a wide mix of knowledge on interest rates. Of those who responded that they are familiar with the credit card interest rate they pay, 21% think they pay between 6% and 10% while 25% think they pay between 18% and 24%. Just over a third (34%) of respondents believe they pay less than 5% in interest.
Overall, the survey highlighted a significant lack of understanding on how interest is applied.
26% of respondents incorrectly stated that they “don’t pay any interest” if they cover the minimum balance due at the end of each month, with 29% correctly stating they know they pay interest on the full balance as well as interest on the outstanding balance from the date of the transaction.
18% of those surveyed said they have made a New Year’s resolution to throw away the credit card while 14% said they would use it to fund a planned holiday. 45% of credit card holders plan to use their monthly income to clear their balance fully every month, while 33% said they would use their income to make the monthly minimum repayment. 11% said they would clear the balance every so often but would miss some months as they wouldn’t have the money available.
Relationships with credit cards
Nearly half of the Northern Irish population (48%) believe credit card companies don’t do enough to explain how interest rates work, while 38% say that the general public lacks an understanding of how credit card interest works.
57% of adults agree that people in Northern Ireland rely too much on credit cards for making purchases. 64% of respondents believe people are now more dependent on credit cards due to the COVID pandemic with 20% feeling that users spend less on their credit cards than before the pandemic.
Commenting on the findings, ILCU Head of Communications, Paul Bailey said:
“This survey highlights that consumer awareness around credit card interest and how that interest is applied is worryingly poor. With over two thirds of consumers in Northern Ireland owning credit cards, it is concerning that 61% of these are unaware of the interest rate they pay.”
“With nearly half of respondents believing that credit card companies aren’t doing enough to clearly explain credit card terms and conditions to consumers, this is worrying given the high usage and over reliance on credit cards among the Northern Irish population.
“I would encourage the public to arm themselves with as much information as possible when it comes to financial products and services to make sure they are making the right financial decisions to suit their individual circumstances. At the credit union, we aim to provide members with the necessary financial education to support them in managing their financial wellbeing”.
For interview requests with Paul Bailey please contact Aoife Breathnach at email@example.com or on 00353 87 350 4810
* The study was commissioned by the Irish League of Credit Unions (ILCU), and carried out by independent research company, iReach Insights, in December 2021. 503 adults responded to the online survey