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Americans emerged from the holiday season feeling more confident about their credit card bills than any time since June, according to a new report from CompareCards.com.
Every month, we survey American credit cardholders to gauge how they’re feeling about their ability to pay off their credit card bills. We ask three things: How confident they are that they can pay their credit cards’ monthly statement balance in full this month, how often they have paid them in full in the past six months and how often they expect to pay them in full in the next six months. The results make up the CompareCards Credit Card Confidence Index.
While confidence deteriorated through most of 2019, the tide began to turn as the year drew to a close. Now, our latest report shows that growing confidence has continued into the new year, though not all of the news is positive.
- 46% of cardholders said they feel “very confident” about their ability to pay their credit cards’ monthly statement balance in full this month. That’s the highest total since June (47%), though slightly below the 48% seen in January 2019.
- Just 16% said they feel “not at all confident,” the lowest total since May (15%) and 2 percentage points lower than January 2019.
- Less cardholders said they paid their cards’ monthly statement balance in full in each of the past 6 months (31%). That’s down from 33% in December and well down from 39% in January 2019. (Twenty-one percent said they never paid in full a single time in the past six months, up 2 percentage points from December, but still in line with numbers seen recently.)
- Men are twice as likely as women to say they are “not at all confident” in paying their card bills in full. Just 10% of men said so, compared with 20% of women. However, both of those percentages decreased in January (down from 14% and 25% respectively).
Feeling good after the holidays
It is no secret that the holiday season is stressful for any number of reasons, which includes money. There’s so much pressure to overspend on presents, parties, travel and more during that time of year that it can be overwhelming. That’s why it shouldn’t be too surprising to see a small drop in the number of folks who paid their card statement balance in full every time in the past six months, which is exactly what we saw. Just 31% of cards paid in full in each of those six months, down slightly from December. The main reason given for not paying in full is simply that there were other expenses to prioritize (29% of respondents said so.) Just 10% blamed holiday spending.
With that holiday spending in the rearview mirror, cardholders’ credit card confidence went up, with 46% of cardholders saying they’re very confident in their ability to pay their card bills in full this month, compared with 44% in December. That’s the same month-to-month increase that we saw from December to January last year (from 46% to 48%).
The bottom line: Confidence remains high, but it won’t stay that way forever.
I believe that by the end of the year, Americans’ credit card confidence will be lower than it is today, driven in part by anxiety over what is likely to be a volatile election. However, that nervousness may not appear for a few months.
In January 2019, 48% of cardholders were “very confident” in being able to pay their credit card bills in full that month. Through June, that number was largely unchanged, falling below 47% just once (46% in February). Things changed dramatically after that, however. From July through the end of the year, that number ranged from 38% to 44%, not reaching the latter number until December.
As 2019 was the first full year of the confidence index, it wouldn’t be wise to draw too many conclusions from those movements or to assume that 2020 will look similar. However, it is easy to see how Americans might feel a bit more queasy about their finances in the second half of the year than the first. The summer brings vacations, then the fall brings back-to-school spending and before people know it, the next holiday shopping season arrives.
Given all that, I would expect confidence levels to remain high for the next few months. With the holidays behind them, many people will focus on getting their financial house in order, which can help people feel better about their bills. However, the mountain of debt that Americans have isn’t going away, so any short-term good feelings cardholders have might eventually fall victim to the reality of tight budgets and small financial margins for error.