SAN
FRANCISCO, Aug. 13, 2024 /PRNewswire/
-- LendingClub Corporation (NYSE: LC), the parent
company of LendingClub Bank, America's leading digital marketplace
bank, has released new data revealing a surprising lack of consumer
awareness regarding the true cost of their credit card debt in
today's high interest rate environment. LendingClub conducted a
national survey of 1,013 consumers from May
13 to May 21 to understand the trends and opinions on credit
card usage and debt management.
APR Confusion and the Knowledge Gap
LendingClub's
recent research on personal finance trends exposes a significant
gap in Americans' financial literacy. Almost half (47.1%) of
Americans are unaware of the current APR on their credit cards. Of
the 52.9% who say they do know their APR, a third didn't know that
their rate is directly tied to the Prime rate, which fluctuates
with Federal Reserve interest rates. In fact, nearly half of all
Americans (49.5%) are unaware that their credit card APR
automatically rose by over 5 percentage points following Federal
rate increases between March 2022 and
July 2023. This highlights a lack of
consumer awareness about the pace of credit card rate changes, a
fundamental misunderstanding of how rates are calculated, and an
inability of consumers to easily find and track their current
rate.
"Credit card balances reached its highest level in history at
$1.14 trillion1, with
average interest rates of 22.76%2 being the highest
we've ever seen," said Mark Elliot,
Chief Customer Officer at LendingClub. "Unfortunately, many
consumers are unaware of these rising costs, and credit card
companies are happy to keep it that way. This lack of transparency
makes it even more challenging for consumers to manage their
finances and get out of debt."
Growing Debt Levels
Over a third of Americans couldn't
manage their finances without a credit card. Despite rising debt
levels, many consumers lack a clear understanding of their
financial obligations. Nearly a quarter (23.6%) of respondents
admit they don't know their total credit card debt. And, while most
consumers use their credit cards for convenience or rewards (and
pay off their balance each month), a sizeable portion of the
population is using their cards to make ends meet amid rising
costs. This cohort is more concerning because they are loading debt
at — unbeknownst to many of them — historically high floating
interest rates.
Over the past two years, credit card rates have increased by 500
basis points, reaching a record of 22.76% on average in
May 2024, according to the Federal
Reserve. Over that same timeframe, 44.7% of Americans increased
their spend on credit cards. Yet, 34.4% of people don't recognize
that credit card APRs can fluctuate over time, independent of
payment history or credit status.
This lack of awareness is not surprising, given that credit card
companies are not required to proactively notify consumers of rate
changes beyond including the information in statements. As a
result, over a quarter of Americans (26.5%) say they don't know
where to find their interest rate, 26.4% didn't know their rates
increase after a promotional period ends, 28.3% don't understand
how interest is calculated, and 39.5% are unaware of balance
transfer fees.
"The need for clearer communication from credit card companies
is more pressing than ever," continued Elliot. "By empowering
consumers with knowledge, we can help them understand their debt
burden so they can make more informed financial decisions and
develop debt management strategies, especially in a high interest
rate environment. Debt itself isn't inherently bad; in fact,
we know from our own research that many are comfortable with – and
even empowered by – carrying debt. The real issue is that credit
cards are designed to do better when the cardholder does worse.
Frankly, the deck is stacked against consumers. One way we're
working to level the playing field for our members is by simply
raising awareness about the debt they're carrying and the true cost
of that debt – a small but important first step toward helping them
avoid pitfalls."
Since 2007, LendingClub has facilitated over $90 billion in loans to more than 4.9 million
members. Members frequently consolidate variable high interest rate
credit card debt into a fixed lower rate loan, providing a clear
path to paying off that debt. Our borrowers who consolidate their
credit card debt typically save on fees and interest, which is
supported by our data that indicates that our members save
approximately $2,054 on average over
the term of a 36-month personal loan from LendingClub3.
For more information on personal loans as a debt management tool,
visit:
https://www.lendingclub.com/personal-loan/credit-card-consolidation-loan.
For a visual summary of these findings, view the accompanying
infographic here:
https://assets.ctfassets.net/orqped9h4wgz/5CdNGQKoYdQ9EmyEE0BJXb/f7614c3f2380726b79fdc1416baf0943/LendingClubDebtSurveyInfographic_Aug2024.pdf.
Methodology
Propeller Insights conducted a national online survey of 1,013
consumers from May 13 to May 21 to
understand the trends and Americans' opinions on credit card usage
and debt management. Respondents opted into an online database, and
from there, they were targeted based on demographics. To further
confirm qualifications, respondents were asked to verify their
information in the survey itself. Self-identifying qualifications
with the maximum margin of sampling error was +/- 3 percentage
points, with a 95% level of confidence.
About LendingClub
LendingClub Corporation (NYSE: LC) is the parent company of
LendingClub Bank, National Association, Member FDIC. LendingClub
Bank is the leading digital marketplace bank in the U.S., where
members can access a broad range of financial products and services
designed to help them pay less when borrowing and earn more when
saving. Based on more than 150 billion cells of data and over
$90 billion in loans, our advanced
credit decisioning and machine-learning models are used across the
customer lifecycle to expand seamless access to credit for our
members, while generating compelling risk-adjusted returns for our
loan investors. Since 2007, more than 4.9 million members have
joined the Club to help reach their financial goals. For more
information about LendingClub,
visit https://www.lendingclub.com.
CONTACT:
For Investors: IR@lendingclub.com
Media Contact: Press@lendingclub.com
1 The Federal Reserve Bank of New York, August
2024. Household Debt and Credit Report (Q2 2024). Retrieved
from https://www.newyorkfed.org/microeconomics/hhdc
2 The Federal Reserve, May
2024. Retrieved from
https://www.federalreserve.gov/releases/g19/current/
3 Reflects the product of: (i) the average dollar
value of a LendingClub balance transfer personal loan originated in
Q2 2024 (a "Q2 2024 LC Loan") and (ii) the difference between the
average APR on credit card debt as reported on WalletHub and the
average APR for a Q2 2024 LC Loan.
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SOURCE LendingClub Corporation