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Consumers’ confidence in paying their credit card bills fell for the first time since November, according to a new report from CompareCards by LendingTree.
February’s Credit Card Confidence Index showed that about 4 in 10 cardholders (41%) said they felt very confident in their ability to pay their monthly credit card statement balances in full this month, rating their confidence level as a 5 out of 5. This is a 5-percentage point drop from January.
However, cardholders’ confidence is hardly shattered. The percentage of cardholders rating their confidence level as a 4 out of 5 hit an 18-month high of 22%, up from 16% a month ago. That indicates that while cardholders aren’t feeling quite as confident as they have in recent months, they’re still generally feeling pretty good about paying their credit card bills.
For each month’s Credit Card Confidence Index, CompareCards asks cardholders how confident they feel in their ability to pay their credit cards’ monthly statement balances in full this month. They’re asked to rate their confidence on a scale of 1 to 5: 1 being “not at all” confident and 5 being “very” confident. We also ask how many times they have paid their monthly statement balances in full in the past six months and how often they expect to do it in the next six.
- 41% of cardholders said they were “very confident” in their ability to pay their credit cards’ monthly statement balance in full this month, a 5-percentage point drop from the previous month and the lowest since November. Just 18% of cardholders said they were “not at all” confident to pay in full this month.
- Just 26% of cardholders said they paid their cards in full each of the past six months, also a 5-percentage point drop from January and the lowest number since November. However, the percentage saying they paid in five of the past six months reached its 18-month high at 14%.
- The primary reasons for not paying in full this month were that the cardholder had other expenses to prioritize and that the balance was just too high.
Cardholder confidence dips but generally remains strong
After back-to-back months of confidence growth, cardholders took a step back in February. However, a deeper look at the numbers reveals a more positive outlook.
Nearly 2 in 3 cardholders (63%) rated their confidence level at a 4 or 5 out of 5 when it comes to paying their credit card bills in full this month. That’s up a single percentage point from December and January and is the highest total since May 2019. It’s a 5-percentage-point increase from February 2019.
That growth is significant, especially considering that the holiday shopping season recently concluded. It’s a good indication that consumers feel that they pulled through the season relatively unscathed – or at least are in a manageable position – when it comes to credit card debt.
When it comes to cardholders’ recent payment history, the numbers look shakier. The survey reveals that 40% of cardholders said they paid their monthly statement balances in full in at least five of the past six months. (That includes the 26% who said they paid in all six months.) That 40% number is unchanged from January and is well above record lows, but it is also 7 percentage points below February 2019 and 11 percentage points below record highs set in June.
The good news is that the percentage of cardholders who never paid their balances in full in the past six months has remained stable since last summer, typically staying within a percentage point or two of the current 20% number. That indicates that while fewer people are paying their bills in full every month, most of those who carry a balance are doing so only sporadically rather than every single month.
The bottom line: Watch for signs of weakening confidence
When it comes to paying credit card bills, consistency matters. Paying your bills in full every single month keeps you from paying interest, makes sky-high APRs irrelevant and helps improve your credit. However, the truth is that life is expensive in 2020 and for many cardholders, paying in full simply isn’t a practical expectation.
In the coming months, it will be important to watch to see if more cardholders say they’re paying in full less often. And it’s not just observing those who never pay in full. A jump in the number of cardholders saying they paid in full in just three or four of the past six months, for example, could be a sign of bigger financial trouble on the horizon.
CompareCards commissioned Qualtrics to conduct an online survey of 1,047 cardholders, with the sample base proportioned to represent the overall population. The survey was fielded Feb. 7-13, 2020.