Third Annual Survey of America's ''Financial IQ'' Shows Understanding of Financial Fundamentals
Survey finds Americans grasp the basics, but still room
for improvement in many areas
MCLEAN, Va.--(BUSINESS WIRE)--Sept. 26, 2007--The third annual survey of America's IQ on personal finance shows that Americans understand financial management basics, but that significant gaps still exist in their knowledge. The national survey of 1,003 men and women, conducted by consumer advocacy group Consumer Action and leading financial services provider Capital One Financial Corporation (NYSE:COF) finds that many Americans are missing important savings opportunities, and don't take simple steps to protect themselves from crimes like identity theft.
The 2007 survey found that: -- The majority of Americans (64 percent) consider themselves highly or very knowledgeable when it comes to personal finance. -- A strong majority of Americans use budgets to stay on top of their daily finances. Sixty-four percent reported using budgets regularly. -- Most Americans (53 percent) are still using traditional passbook savings accounts for their savings. -- One in five Americans (22 percent) claim they do not know the interest rate on their mortgage.
"Things like budgeting and regular savings are vital to maintaining a healthy financial situation, and it's good news that so many Americans understand the importance of these simple actions," said Lahne Mattas-Curry, financial education spokesperson at Capital One. "However, it is only the beginning of true financial fitness. People should take steps to maximize their savings, be aware of the interest rates on their accounts and loans, and never overlook necessary tasks like checking their credit report regularly."
Budgeting and banking habits are improving
The Capital One-Consumer Action survey finds that Americans' financial habits are good, particularly when it comes to keeping track of expenses. More than six out of 10 Americans (64 percent) are using budgets regularly and over half (56 percent) report that they stick to their budgets and modify them rarely or only if unexpected expenses arise. Most Americans (61 percent) are checking their account balances regularly (at least 2-3 times a month) for errors and recent activity. Forty-one percent of Americans check their balances weekly or more often, and 16 percent say they actually check their balances daily.
Capital One and Consumer Action strongly encourage consumers to develop personal budgets to meet their short and long-term financial goals. Following are tips consumers can use to get started.
-- Establish your financial goals - Before creating a budget, you must first consider and establish your own financial goals. Short-term goals could include setting aside money to cover regular household expenses or saving toward an annual family a vacation. Long-term financial goals might include planning for retirement or saving for a second home. -- Develop a realistic budget that you can stick to - Create a budget that captures all of your household expenditures, including setting aside money for saving. This ensures you are in control of your financial situation and on track to meet your financial goals. Americans are missing important savings opportunities.
While the majority of Americans do regularly put aside money in savings, many are not maximizing that money for their greatest benefit. Most Americans (53 percent) are still using traditional passbook savings accounts for their savings. High-yield money market accounts and certificates of deposit (CDs) both generally offer a significantly higher interest rate, but few take advantage. In fact, over a third of respondents claimed they do not know what the interest rate is on their savings vehicle. And while a quarter of respondents cited "retirement" as their number one reason for savings, nearly half of Americans (48 percent) still do not participate in any kind of retirement plan, such as a 401k or an IRA.
Americans continue to neglect their credit reports
Credit scores are also an important indicator of your financial well-being - the higher your credit score, the more likely you are to be approved for loans and receive favorable rates. Experts agree that checking your credit report for errors is the best line of protection against identity theft, credit card fraud and other crime. Yet the Capital One-Consumer Action study reveals that an increasing number of people don't regularly obtain their credit reports. Twenty-eight percent of those surveyed reported that they have never checked their credit report - an increase from the 27 percent who reported the same last year. Despite the availability of a free annual credit report from each of the major reporting agencies, 50 percent of Americans are unaware that the reports are free of charge.
"Credit records are not just used when applying for a loan or credit card. Employers, landlords and even employers regularly check credit records. Bad credit not only means you will pay more in interest, it can also affect your ability to get a job, rent an apartment - even get a cell phone," said Ken McEldowney, Executive Director of Consumer Action. "It's important to regularly obtain a copy from each of the three major credit bureaus and check each for accuracy. Reports are easier than ever to obtain and cost nothing."
Consumer Action and Capital One offer these tips consumers can use to protect and improve their credit.
-- Correct any mistakes on your credit report - Credit reports can contain mistakes and it's your responsibility to correct them by contacting each of the three major credit reporting bureaus - Equifax, TransUnion and Experian. -- Protect against identity theft by checking your credit report - Regularly checking your credit report is one of the best ways to protect against identity theft and credit fraud. Consumers are eligible for one free credit report every year from each of the three major credit reporting agencies. Copies can be requested online at www.annualcreditreport.com or by calling 1-877-322-8228.
MoneyWi$e program arms consumers with financial tools and information.
Education is the key to a healthy financial future. To help consumers, Capital One and Consumer Action created the MoneyWi$e financial education program. MoneyWi$e combines free, multilingual financial education materials with community training and seminars to give consumers at all income levels the information and the practical assistance they need to make smart financial choices. The MoneyWi$e series includes a number of free, multilingual brochures on a variety of personal finance topics, including improving and rebuilding credit, budgeting, and saving and investing. Consumers can obtain free brochures by visiting www.money-wise.org.
The findings reported in this release are from a telephone survey conducted by the opinion research firm, Braun Research of Princeton, New Jersey. The survey was sponsored by APCO Worldwide. Braun Research completed 1002 interviews with adults nationwide. The interviews were conducted between September 2, 2007 and September 4th, 2007. The margin of error for this study is +/- 3.10 percentage points at the 95 percent confidence level. Interviews were monitored at random. Sampling for this study was supplied by SSI (Survey Sampling Inc.) and was drawn at random by technicians overseeing their database.
All interviews were conducted using a computer assisted telephone interviewing system. Statistical weights were designed from United States Census Bureau statistics. All interviews were monitored at random.
About Capital One
Headquartered in McLean, Virginia, Capital One Financial Corporation (www.capitalone.com) is a financial holding company, with 725 locations in New York, New Jersey, Connecticut, Texas and Louisiana. Its principal subsidiaries, Capital One Bank, Capital One Auto Finance, Inc., and Capital One, N.A., offer a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One's subsidiaries collectively had $85.7 billion in deposits and $144.2 billion in managed loans outstanding as of June 30, 2007. Capital One, a Fortune 500 company, trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.
About Consumer Action
Consumer Action is a national non-profit education and advocacy organization founded in San Francisco in 1971. Consumer Action serves consumers nationwide by advancing consumer rights, referring consumers to complaint-handling agencies and publishing multilingual educational materials. Consumer Action also advocates for consumers in the media and before lawmakers and annually conducts comparison surveys for consumers on credit cards, banking issues and telecommunications issues.
CONTACT: Capital One Financial Corporation, McLean
Lahne Mattas-Curry, 703-720-2358
SOURCE: Capital One Financial Corporation