Shocking ME survey reveals mass ignorance regarding interest rates, credit cards and personal loans
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Shocking ME survey reveals mass ignorance regarding interest rates, credit cards and personal loans
74% of Aussies don’t know what a comparison rate is, a survey by ME bank has found.
The statistic emerged in a study of the financial literacy of 1500 adults of all ages. 57% of participants did not understand that banks determined actual interest rates, rather than the RBA or other institutions, whilst 36% didn’t know that reducing the length of a loan reduces the amount of interest paid.
35% of those surveyed admitted they’d done nothing to educate themselves on banking products, which ME head of deposits and transactional banking Nic Emery said may have contributed to the results: “some Aussies fail to educate themselves because they find banking dull and complex and think they know best, while others find working with numbers difficult and put their head in the sand.”
Misunderstanding debt
Brokers working with first home buyers, highly geared investors or non-conforming clients will find ME’s results particularly disturbing.
42% of those surveyed did not understand compounding interest and thus the reason to be patient with savings. Almost three-quarters of respondents did not realise that repaying a credit card at its minimum level could mean the debt would take decades to pay off.
In addition to the difficulty of understanding who sets interest rates, 41% of participants were wrong about what determines their interest when presented with options such as credit rating, secured or unsecured and length to repayment.
There was also mass confusion over the role of lenders mortgage insurance. Just 20% of those surveyed realised that LMI does not cover the borrower if they were unable to keep up repayments.
Finding information
28% of those surveyed by ME had spoken to a professional advisor, a category that includes brokers.
Other methods used to learn about finance included reading information on websites, news and comparison sites (40%) and talking to family and friends (19%). Only 7% had attended workshops, seminars or completed online courses.
Mortgages were not a huge area of concern for those surveyed: just 10% were ‘not confident’ that they’d found the right product for their needs and to maximise their financial position.
74% of Aussies don’t know what a comparison rate is, a survey by ME bank has found.
The statistic emerged in a study of the financial literacy of 1500 adults of all ages. 57% of participants did not understand that banks determined actual interest rates, rather than the RBA or other institutions, whilst 36% didn’t know that reducing the length of a loan reduces the amount of interest paid.
35% of those surveyed admitted they’d done nothing to educate themselves on banking products, which ME head of deposits and transactional banking Nic Emery said may have contributed to the results: “some Aussies fail to educate themselves because they find banking dull and complex and think they know best, while others find working with numbers difficult and put their head in the sand.”
Misunderstanding debt
Brokers working with first home buyers, highly geared investors or non-conforming clients will find ME’s results particularly disturbing.
42% of those surveyed did not understand compounding interest and thus the reason to be patient with savings. Almost three-quarters of respondents did not realise that repaying a credit card at its minimum level could mean the debt would take decades to pay off.
In addition to the difficulty of understanding who sets interest rates, 41% of participants were wrong about what determines their interest when presented with options such as credit rating, secured or unsecured and length to repayment.
There was also mass confusion over the role of lenders mortgage insurance. Just 20% of those surveyed realised that LMI does not cover the borrower if they were unable to keep up repayments.
Finding information
28% of those surveyed by ME had spoken to a professional advisor, a category that includes brokers.
Other methods used to learn about finance included reading information on websites, news and comparison sites (40%) and talking to family and friends (19%). Only 7% had attended workshops, seminars or completed online courses.
Mortgages were not a huge area of concern for those surveyed: just 10% were ‘not confident’ that they’d found the right product for their needs and to maximise their financial position.
