The holiday shopping “ho ho ho” is about to become oh no no for millions of American consumers. The latest CompareCards Credit Card Confidence Index shows only 40% of cardholders feel “very confident” about paying off their credit cards in full. That’s down from 46% who felt very confident at this time last year.
“I think that a lot of that is simple pressure to spend,” CompareCards chief industry analyst Matt Schulz told Yahoo Finance’s On the Move. “A lot of it is simply not wanting to let your kids, or your friends, your family down. So people keep spending.”
The most recent data from the Federal Reserve shows U.S. consumers carry a little more than $1 trillion on their credit cards and other revolving debt. Every month, CompareCards asks cardholders to gauge how confident they feel about their ability to pay their monthly credit card statement in full. “And what we’re seeing generally, with economic numbers, is the delinquencies are still pretty low,” Schulz said.
But even though people are paying, at least the minimum on time, Schulz points out the confidence level may indicate they are unable to pay their bills off in full.
The ‘squishy middle’
The CompareCards survey found just 26% of people said they paid their credit card statement balance in full in the past six months. That’s down from 36% last year and the lowest number in 15 months. 34% of women said they felt confident about paying their bill in full this month compared to 46% of men.
The majority of cardholders fall into what Schulz calls the “squishy middle” when it comes to paying their bills. “They’re paying on time, but their debts just keep growing,” said Schultz, adding that they feel confident but not as good as they did last year.
He said other expenses taking priority is cited as the most common reason people worry they will be unable to pay their card balance in full. “The main implication is that if you’re building up credit card debt in good economic times, which by most accounts we certainly are in, you’re probably not putting enough money away for when things eventually turn south,” he said.
Eventually something has to give “at some point, there will simply be too much debt for Americans to handle without a big spike in delinquencies and bankruptcies and such,” Schulz said. And while consumers may be able to stay afloat now, “a recession, a natural disaster, political upheaval,” could swamp them in the near future.
Adam Shapiro is co-anchor of Yahoo Finance On the Move.