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Americans More Confident in Ability to Pay Card Bills Despite Rising APRs

Americans More Confident in Ability to Pay Card Bills Despite Rising APRs

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This article was last updated Nov 26, 2018, but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.

American consumers are becoming more confident about their ability to pay their credit card statement balances in full, according to a new report from CompareCards.com. That’s despite the continued rise in credit card APRs, which shows no signs of slowing down.

These findings came from the November edition of the monthly Credit Card Confidence Index from CompareCards.com. The survey tracks American credit cardholders’ confidence in their ability to pay their credit cards’ monthly statement balance in full this month and six months from now, as well as tracking how often they’ve paid those balances in full in the past six months.

In addition, CompareCards.com tracks the APRs and other terms and conditions of about 200 credit cards on a monthly basis. This month, our report showed the average APR for a new credit card offer inched closer to 17%, and with more Fed rate hikes on the horizon, there’s no reason to believe rates won’t continue their upward climb.

Key findings:

46% of credit cardholders say they’re very confident in their ability to pay their cards’ monthly statement balances in full this month – more than twice the number who say they’re not at all confident.

Even as the holiday shopping season approaches, cardholders’ confidence in their ability to pay their bills continues to grow. Nearly half of cardholders (46%) rated their confidence level as a 5 out of a possible 5, while 18% rated theirs as a 4 out of 5. Both of those numbers are the highest in the past three months.

Just 20% said they were “not at all” confident, saying their confidence level was a 1 out of 5. That matches the lowest percentage seen in the past three months. Another 5% rated their confidence as just a 2 out of 5.

36% of cardholders said they’ve paid their cards’ monthly statement balances in full each of the past six months, while another 14% have done so in at least five of the past six.

Half of American cardholders say they’ve paid their credit cards’ monthly statement balances in full at least five of the past six months. That’s the highest percentage we’ve seen in the past three months.

Meanwhile, just 17% of cardholders said they had not paid those balances in full a single time in the past six months, and another 6% said they done so just once. Both of those numbers are the lowest in the past three months.

The index also showed a gender divide when it comes to paying bills in full. More than half of men (56%) said they’d paid in full in at least five of the past 6 months, while just 43% of women say the same.

The average APR for a new credit card offer is 16.91%.

Credit card interest rates are rising alongside Americans’ confidence in their ability to pay off their card balances.

Our review of about 200 credit cards showed the average APR for a new credit card offer climbed from 16.83% to 16.91%. As has been the case for much of the past several years, the rate increase has mostly been driven by recent rate hikes from the Federal Reserve. When the Fed raises rates – as it did in late September – the APR for the vast majority of U.S. credit card accounts rises by the same amount.

These increases don’t happen immediately, however. It’s not uncommon for issuers to take more than a month to implement the increases across their cards.

The bottom line: Eventually, something has to give.

It’s a positive sign that Americans continue to feel confident about being able to pay their credit card bills in the face of rising APRs. However, that can’t last forever. It’s likely a question of when, not if, we start to see that change.

I’d expect to see at least a short-term shift as early as next month. The holiday shopping season is an expensive and challenging time of the year for many folks. (A recent CompareCards.com survey said most Americans find shopping to be the most stressful part of the holiday season.) All of that holiday spending is likely to make people feel less confident about paying off their bills immediately.

That won’t necessarily be a long-term shift, however. As long as the economy is strong, unemployment is low and people are feeling good about their financial situation overall, small increases in credit card APRs aren’t likely to derail those good feelings. However, once the economy turns south — good times don’t last forever — Americans will start to feel the impact of these rate hikes. Those bills that were easy to pay off in good times may become more difficult, and millions of Americans will begin to wish they’d done more to eliminate those debts while times were still good.

Methodology

CompareCards by LendingTree commissioned Qualtrics to conduct an online survey of 848 Americans, with the sample base proportioned to represent the general population. The survey was fielded Nov. 2-6, 2018, and the margin for error for all respondents is +/- 3.4%.

Also, CompareCards tracks the APRs and other terms and conditions for about 200 major credit cards each month. The selection of cards is meant to be representative of the overall credit card marketplace and includes large and small banks, co-branded retail credit cards, credit union cards and more. The card information was found online at card issuers’ websites.

To track the trends from prior Credit Card Confidence Indexes, click the month: September, October.


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