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 WASHINGTON, Sept. 2 /PRNewswire/ -- A survey of the consumer knowledge of college students found that most are unprepared to make wise purchasing decisions about financial services. The college students scored correct answers for only 51 percent of the survey questions when they could have scored 25 percent by guessing.
 The test was jointly sponsored by the Consumer Federation of America (CFA) and American Express Travel Related Services Company, Inc. The research was conducted by Princeton Survey Research Associates of Princeton, N.J.
 The 38-question multiple choice test surveyed 2,010 students on 75 campuses, representing a sample of full-time juniors and seniors attending four-year colleges and universities. Students answered questions on credit (53 percent correct), checking/savings (53 percent correct), life insurance (43 percent correct) and auto insurance (58 percent correct).
 "Most college students are not fully prepared to make smart decisions about financial services," said Stephen Brobeck, CFA executive director and author of the report summarizing the research. "After college, they risk losing billions of dollars in the purchase of unneeded or overpriced consumer loans, auto insurance, and life insurance."
 Meredith Layer, senior vice president, public responsibility at American Express Company (NYSE: AXP), added, "College is a time when students are developing life skills -- beyond what is included in their classroom curriculum. One of the most important tools for a consumer is knowledge about financial matters."
 Scores of the college students were much higher than those of high school seniors who took a similar test in 1991, and the scores were about the same as those of adults who were asked many of the same questions in 1990. In general the test scores of different groups of students taking the test -- men vs. women, juniors vs. seniors, public school vs. private school, humanities vs. science/math vs. business majors -- did not differ significantly. Although the scores of whites were higher than those of minorities, race-related differences were not nearly as great among college students as they were among the high school seniors and adults tested earlier.
 Low Scores Included:
 -- Only 22 percent know that the best indicator of the cost of a loan is the annual percentage rate (APR).
 -- Only 33 percent of respondents know that banks and other institutions issuing credit cards -- not Visa, Mastercard or the government -- set interest rates on credit cards.
 -- Only 30 percent know that when a credit card balance is carried from month-to-month, the consumer loses the grace period.
 -- Only 19 percent know that auto insurance rates can vary by as much as 100 percent, while over half think that rates range less than 30 percent.
 -- Only about one-third understand the major differences between term, whole, universal, and credit life insurance policies. Only 26 percent know that the interest-adjusted cost is the best indicator of the cost of a whole life insurance policy.
 -- Only 30 percent know that the government agency most likely to resolve an insurance problem is a state insurance department. 30 percent actually believe that the Federal Deposit Insurance Corporation, which regulates banks, resolves insurance problems.
 -- 92 percent of the respondents know that the most important factors that lenders use when deciding whether to approve a loan are bill-paying records and income.
 -- 90 percent understand what type of household most needs life insurance.
 -- 70 percent know that to avoid regular fees on a checking account, a consumer must keep a minimum balance in the account at all times.
 -- 68 percent know that a collection agency is not allowed to discuss a consumer's debt with his or her employer.
 -- 66 percent know that a credit bureau provides creditors with reports of consumers' bill-paying records.
 The Consumer Federation of America is a federation of 240 nonprofit groups with some 50 million members that seeks to advance the consumer interest through advocacy and education.
 American Express Travel Related Services Company, Inc. is a wholly- owned subsidiary of the American Express Company -- a family of travel, financial, and communications businesses.
 To receive a copy of the test report and questions, send $10 to: Consumer Federation of America, 1424 16th Street, NW, Washington D.C. 20036.
 -0- 9/2/93
 /CONTACT: Stephen Brobeck of Consumer Federation of America, 202-387-6121, or Gail Wasserman of American Express, 212-640-2675/

CO: Consumer Federation of America; American Express Corporation ST: District of Columbia IN: FIN SU:

LD-OS -- NY002 -- 8268 09/02/93 09:01 EDT
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Publication:PR Newswire
Date:Sep 2, 1993

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