New research suggests that 65% of consumers don’t know how their credit card interest is calculated.
The survey carried out by the Irish League of Credit Unions (ILCU) shows that this figure is up 7% on the previous survey conducted in 2020.
Of the respondents who said they are familiar with the credit card interest rate they pay, 26% think they pay between 11% and 17%, while 38% think they pay 18% to 24%.
One fifth of these respondents believe they pay less than 5% in interest with over half believing they are paying less than 10%.
The ILCU said interest rates on credit cards typically range from 13% to 26%.
“This survey highlights that consumer awareness around credit card interest and how that interest is applied is still worryingly poor,” said Paul Bailey, Head of Communications at the ILCU.
“With over half of consumers owning credit cards, it is concerning that there has been a decrease in peoples’ awareness of the interest rate paid on credit cards since our last survey,” he added.
The survey reveals that 36% of credit card holders surveyed incorrectly said they don’t pay any interest if they cover the minimum balance due at the end of each month.
31% correctly said they knew that they paid interest on the full balance as well as interest on the outstanding balance from the date of the transaction.
Almost 70% of those surveyed said they believe credit card companies in Ireland don’t do enough to explain how interest rates work.
“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,” said Mr Bailey.
The survey reveals that over half of the Irish population own a credit card.
56% said they use it to buy ad hoc purchases each month, while 10% said they would use it to fund a planned holiday and 14% said they have made a New Year’s resolution to throw the card away.
68% of credit card holders said they plan to use their monthly income to clear their balance fully every month, while 15% said they would use their monthly income to make the monthly minimum repayment.