One of the most common recommendations for using a credit card successfully is to pay off the balance in full every billing cycle so you avoid interest charges. Just about everybody knows that — but that doesn’t mean everyone does it. In fact, despite some modest improvements in credit card usage habits since the recession, roughly half of American credit card users still end up carrying a balance and paying interest, according to a new survey by the Financial Industry Regulatory Authority (FINRA) — a private organization that helps regulate the financial industry. And a surprising number make other expensive critical credit card mistakes, too.
The results of the FINRA survey about “risky credit card behaviors” were published in a report called “Financial Capability in the United States.”
Back in 2009, during the height of the recession, only 41% of U.S. adult credit card users said they paid their bills in full every month. By 2015, that number had risen to 52%, the report says. That’s a substantial improvement, but it still means about half of credit card users are still paying costly credit card interest rates.
Credit cards are a critical way that Americans engage in short-term borrowing — 77% of Americans hold at least one credit card, according to the report. But revolving credit can be expensive, with penalty interest rate approaching 30%.
Credit card spending, which was sharply curtailed during the recession, has reportedly surged in recent years. According to the Federal Reserve, outstanding credit card debt has grown from $842 billion to $953 billion since 2011, and is right now growing at an annualized rate of 3%.
The FINRA report unearthed other bad credit card habits, too. Nearly one-third (32%) of respondents admitted that in some months they pay only the minimum payment on their credit card bills. That’s down from 40% in 2009. On the other hand, the number of people who say they paid a late fee (14%) has been cut nearly in half since 2009 (26%).
Overall, the FINRA report says that 39% of cardholders engage in at least one “risky” behavior, destined to make their credit card bill more expensive through fees and interest than it has to be.
Not surprisingly, those with lower incomes were far more likely to do so. About 49% of those earning under $25,000 annually engaged in risky card usage, while only 29% of those earning more than $75,000 did. African Americans (56%) were almost twice as likely as whites (35%) to pay credit card interest or fees.
The report echoes other research showing that credit card usage is up by many measures. The American Banking Association (ABA) reported earlier this year that new credit card account volume rose a stunning 16.5% during 2015.
“Recent growth in the credit card market is consistent with what we’re seeing in the broader economy,” Jess Sharp, executive director of ABA’s Card Policy Council, said in a press release. “With nearly 6 million jobs created over the last two years, it’s natural to see strong growth in new cards and purchase volumes. Faster wage growth and healthy levels of disposable income have helped shore up many account holders who may have had difficulty managing their credit in the past. Consumers are now in a better position to pay on time and rebuild their credit.”
With all this flurry of activity, the FINRA report suggests that many consumers are still engaging in what might be the riskiest of all behaviors: Failing to shop around and get the best credit card deal. Only 35% of adults said they compared information from “more than one company” when obtaining their most recent credit card. Millennials, at 46%, were slightly more likely to comparison shop than the rest of the population.
If you’re thinking about getting a new credit card, it’s a good idea to shop around. You can start by finding out your credit scores, as this will help you get an idea of what terms and conditions you may qualify for. You can view two of your credit scores for free, updated each month, on Credit.com.