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Americans’ confidence in their ability to pay their credit card bills continued to decline in September, according to a new report from CompareCards.com, as fewer cardholders manage to pay their statement balances in full at the end of the month.
CompareCards takes the pulse of the American credit cardholder every month, asking them how confident they are in being able to pay their credit cards’ statement balance in full this month, how often they’ve paid in full in the past six months and how often they expect to do so in the future. The result is the CompareCards Credit Card Confidence Index.
For much of the past year, the Index showed a strong, confident credit cardholder, even in the face of more than $1 trillion of credit card debt. However, in the last few months, we’ve seen an unmistakable shift. Confidence has taken a hit, and fewer people are paying their bills in full. It is unclear what caused the shift and how long it will last, but what is clear is that the data shows cardholders today aren’t feeling as good about their credit card bill as they were just a few months ago.
- 23% of cardholders said they didn’t pay their credit card bills in full a single time in the past six months. That’s up 2 percentage points from last month, the fifth straight monthly increase. It also equals the highest percentage yet seen in the index.
- 38% of cardholders say they’re very confident in their ability to pay their credit cards’ statement balance in full this month. That’s the lowest in the 13-month history of the index.
- 23% of cardholders say they’re not at all confident in their ability to pay their credit cards’ statement balance in full this month. This equals the highest percentage since CompareCards.com started the index over a year ago, tying the mark set in February 2019.
- Nearly 1 in 3 women (32%) said they’re “not at all” confident, the highest percentage we’ve seen. Just 15% of men said the same.
- 41% of men said they’re “very” confident, that’s the lowest number yet seen in the index. (36% of women said so, a 1-point increase over last month.)
- 30% of cardholders said they paid their credit card bills in full in all of the past six months. That’s unchanged from last month, holding at the lowest levels yet seen in the index.
- 29% of women said they paid their cards’ statement balance in full in zero of the past six months, a slight dip from last month. That’s the same percentage that said they paid their cards’ statement balance in full in all six of the past six months.
The bottom line: A troubling sign
Since the nation emerged from the rubble of the Great Recession, credit card debt has grown steadily, long since passing the record levels seen before the economic crisis. However, low unemployment and a strong economy have meant consumers have been able to keep up with paying their bills and have generally felt good about their financial standing.
Unfortunately, that confidence can’t last forever. With U.S. consumers carrying more than a trillion dollars in credit card debt, combined with record-high card APRs (despite a recent rate reduction by the Fed), something has to give. Whether cardholders have finally hit that point remains to be seen – and it is entirely possible that this down stretch will prove to be an anomaly – but in any case, it’s clear that right now Americans are not brimming with confidence the way they had in previous years. That could be a troubling sign for the economy.
How should consumers react? By knocking down their own debts.
If you’re worried about your financial future, one of the best things that you can do is build a rainy-day fund for when bad times come. However, that’s hard to do that when you’re wrestling with thousands of dollars in debt. When you’re paying off debts, it means that you’re probably not able to put as much money away as you’d like for the future, so whittling down those card balances is crucial.
As the saying goes, the first step to getting out of a hole is to stop digging. There are plenty of ways to do that – making a budget, reducing expenses, generating more income and so on – but two strategies that people often overlook can help you in a big way, if you take the time to do them.
Get a 0% balance transfer credit card: It’s been said a million times. Yes, it may seem counterintuitive to tackle credit card debt by getting another credit card. And yes, if you lack the means, control or desire to use the card wisely, you shouldn’t get it. However, if you’re struggling to get your card debt under control, these cards can be an absolute godsend.
Many cards are available today that give you 12, 15 or even 18 months interest-free on the transferred balance. That can mean a significant reduction in both the amount of interest you pay and the length of time required to pay down the debt.
Again, the key to success with this is to use the card wisely. It shouldn’t be seen as an excuse to spend more, which can actually make your situation worse, and no one wants that.
Calling and asking for a lower interest rate: No, really. It works more often than you’d think. An April 2019 CompareCards survey showed that 81% of those who asked for a lower APR were successful, and the average APR reduction was about 6 percentage points. The problem is that only about 1 in 5 cardholders asked.
You’re more likely to be successful if you have good credit and a longer track record with your issuer, but these sky-high success rates suggest that it’s not just folks with 800 credit scores who are getting their way.
How much difference can a 6 percentage-point decrease make? A lot. Consider this…
- If you owe $5,000 with an APR of 24% and pay $250 each month, you’ll pay $1,449 in interest and take 26 months to pay off your debt.
- With that same $5,000 balance and $250 monthly payment and an APR of 18% – a 6-percentage-point decrease – you’ll pay $989 in interest and take 24 months to pay off.
- That means you’ll pay $460 less in interest and pay it off two months faster.
Still wondering if you should make that call?
CompareCards by LendingTree commissioned Qualtrics to conduct an online survey of 766 Americans, with the sample base proportioned to represent the general population. The survey was fielded September 5-9, 2019, and the margin for error for all respondents is +/- 3.5%.