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article imageMajority do not understand differences between credit cards

By Tim Sandle     Jun 20, 2014 in Business
A large number of credit card users do not fully understand their card's terms, benefits and rewards program, and have trouble selecting between different types of cards. This is according to an annual survey of credit card users.
This significant level of confusion has been highlighted by the J.D. Power U.S. Credit Card Satisfaction Study. The study has been running for seven years and it provides a good indicator of consumer attitudes to their flexible plastic.
The annual study polls people and examines six key factors: interaction; credit card terms; billing and payment; rewards; benefits and services; and problem resolution. The study highlights the difficulties people experience when selecting between credit cards. One area that causes confusion is using a credit card when overseas.
The latest survey found that customer awareness of earning and redeeming rewards with their credit card has declined year over year, with only 59 percent of customers "completely" understanding how to earn rewards, compared with 66 percent a year earlier. Furthermore, 33 percent of customers indicate they are unaware of the benefits associated with their card.
The survey also found that few people change credit card regularly (suggesting that people are not always aware of websites ranking credit cards and giving advice about the best rates and conditions). Furthermore, only 47 percent of credit card customers understood their credit card terms. Among these customers, 73 percent indicate a lack of clarity regarding interest rates, and 31 percent lack an understanding of late payment fees.
Despite these drawbacks, credit cards have many advantages. Money Supermarket has recently listed ten reasons to use a credit card. These are:
1. To spread payments: especially if you cannot afford to pay for a purchase in one go.
2. To cut the cost of existing debts: if you owe money on an existing credit card you may be able to reduce the cost by transferring it over to a card charging a lower rate of interest.
3. To spend overseas: changing money can be an unexpectedly high cost for holidaymakers and this is another area is where having the right credit card can help.
4. To protect your purchases: paying with a credit card can actually give greater protection than a debit card or cash.
5. To earn cashback: Some cards offer cashback on purchases.
6. To earn airmiles: Airmiles are sometimes a preferred option to cashback.
7. To build a credit rating: People can build up a good credit rating up using a credit card.
8. To donate to charity: Some cards allow charitable donations to be made.
9. To get discounts: Some cards are linked to offers and discounts with certain products.
10. To save money on groceries: Some credit cards are affiliated with supermarkets.
In a separate survey, the website Global Traveller named United MileagePlus Club Card from Chase the best credit card and also having the best credit card rewards program. According to the Washington Post, overseas travel is an important issue with credit card users, especially with the risk of hidden fees. One issue is "dynamic currency conversion" offers. These point-of-sale systems in tourist hot-spots often use an unfavorable exchange rate while tacking on processing fees. Here foreign merchants take advantage of this fact at the checkout counter by offering to quote the final price in the user’s and, unbeknownst to many tourists, making that conversion at an uncompetitive exchange rate. Similar high costs are linked to ATM cash advances, where many credit cards charge hefty cash advance processing fees.
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