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Few in Arizona compare offers when shopping for credit cards

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Friday, May 31, 2013
By Xi Chen
Cronkite News

WASHINGTON – Two-thirds of Arizonans don’t bother to comparison shop when looking at credit cards, which can saddle consumers with higher-than-necessary fees, interest rates and ultimately higher borrowing costs, according to a new report.

Arizona residents were only slightly worse than the rest of the nation, with 64 percent of state residents surveyed in 2012 saying they did not shop for credit cards, compared with 61 percent nationally. It shows that America’s financial literacy remains low and people need help to manage their personal finances, said the Financial Capability report released by the Financial Industry Regulatory Authority, a private nonprofit group.

“The result suggests that there is a gap in applying financial decision-making skills to real-life situations,” said FINRA Foundation President Gerri Walsh.

While some financial decisions can be challenging even for experts, Walsh said comparing credit card offers requires only basic financial knowledge and competency.

“Comparison shopping is a significant part of financial decision-making skills,” she said.

But sorting out credit-card offers and options can be confusing for consumers, said Mike Sullivan, chief education and operating officer for Take Charge America. The national nonprofit credit counseling agency is headquartered in Phoenix.

“Most people just get the one (card) that is recommended by the email banks send,” Sullivan said. But he said it is incredibly important that consumers comparison-shop.

Every card has advantages and disadvantages, Sullivan said. While some have lower interest rates, others offer consumer rewards, cash back or airline miles.

“The temptation of getting a free air ticket for 100 points makes people forget about the annual fee they have to pay,” Sullivan said.

Sullivan does not worry about interest rates when he considers a credit card “because I always pay back on time,” but people who carry a monthly balance should be more concerned about the rate.

“It is difficult and it depends on how you use the card,” Sullivan said.

Vince Shorb, CEO of the National Financial Educators Council, said he was “a little shocked” by the lack of comparison shopping for credit cards at a time when “the economic isn’t doing very well.”

On the other hand, Shorb said the lack of comparison shopping is not uncommon elsewhere.

“It happens all the time when people are trying to buy cars, houses or other stuff,” he said.

Shorb agreed with Sullivan that card-shopping can be difficult given the large amount of advertising consumers face, which makes it increasingly difficult and time-consuming to compare offers. Some may try and end up throwing up their hands, which he said points to the number of people who can’t pass the basic financial knowledge test.

“It is crucial for people to form a fundamental understanding of money basics at an early age,” Shorb said.

That financial education should come from both professional institutions and family members, he said.

“Young people, especially kids, need someone to talk to them about money,” a talk that Shorb said could come from just about anyone.

“Teachers, uncles, or even godfathers,” he said.