35% of Americans Overdraft and 42.4% Have Credit Card Debt According to New Survey by MagnifyMoney
May 14, 2014 - NEW YORK, NY
Complicated financial products hidden behind pages of fine print are costing Americans billions of dollars every year. According to a just-released survey on Americans and their finances, conducted by SSI for MagnifyMoney:
- 35% have gone overdraft in the last year
- 42.4% carry credit card debt, with an average balance of $10,902
- 75.7% pay an interest rate higher than 15%, despite interest rates close to 0%
- 73.4% of people with savings keep their money in traditional bank accounts that pay close to 0%
By choosing the right financial products, a majority of Americans could save hundreds to thousands of dollars. Launching today, MagnifyMoney.com provides consumers with a simple, unbiased way to comparison-shop for financial products. Created by former banking industry insiders, the new site utilizes firsthand knowledge to advocate for consumers and educate the public about the banking industry's confusing fees and complex practices.
According to Nick Clements, co-founder of MagnifyMoney, "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. We intend to save consumers thousands of dollars a year by helping them switch and save."
The survey found that 35% of Americans have gone overdraft, on average 2.5 times in the last year. More than half (53.2%) said they do it because they are forgetful, and 46.8% because they are short of money. Millennials are more likely to go overdraft, with 39.5% reporting overdrafts in the last year. The average overdraft and Non Sufficient Fund (NSF) fees paid by individuals who go overdraft are $225 a year, according to Consumer Financial Protection Bureau (CFPB) data. The MagnifyMoney survey also reported that the main reason people don't enroll in overdraft protection is that 43.6% don't know where to look and 39.3% think it is too complicated.
"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 Clements. "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."
Credit Card Debt
The survey reveals that credit card debt continues to be an issue for American consumers. Close to half (42.4%) of Americans carry credit card debt, with an average balance of $10,902. In fact, 75.7% of people with credit card debt reported that their interest rate is higher than 15%, according to the survey. Millennials reported an average of $8,864 in credit card debt, while the survey reported that GenX individuals have the highest average debt at $12,026.
Saving on Savings Accounts
Results from the survey shows that Americans are leaving money on the table and could make smarter choices with better information. For instance, 73.4% of Americans with savings keep their money in traditional savings accounts, which pay interest rates close to 0%. Millennials are more likely to have an online savings account (18.8% versus 13% of non-millennials) and much more open to considering an online savings account (55.1% versus 28.2% for non-millennials).
Clements explained, "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."
Only half of Americans with credit card debt have considered a balance transfer, where they can cut their interest rate to 0% for a period of time, according to the survey. Of those who have used a balance transfer in the past, 89.1% would use one again. Millennials viewed balance transfers most favorably, with 93.6% saying they would do one again.
"Balance transfers give consumers the opportunity to cut their effective credit card interest rate from more than 15% to less than 5%, including fees," said Clements.
The survey, conducted by SSI, sampled 1,435 people during April 2014.
MagnifyMoney was founded in 2014 by Nick Clements and Brian Karimzad, who have a combined nearly 30 years experience working in banking, including Barclaycard and Citigroup. MagnifyMoney is a powerful free resource because its personalized side-by-side comparisons of banking and credit union products are free, unbiased and easy to navigate. With the proprietary Magnify Transparency Score, banking and credit card products are rated on their simplicity, making it easy for consumers to quickly evaluate which products have the least amount of fine print. MagnifyMoney is headquartered in New York, NY.
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