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Americans lose confidence in paying credit card bills

·Personal finance writer
·4 min read

Inflation is eating away at Americans’ financial security.

The share of Americans who weren’t confident they could pay their credit card balance in full hit its lowest point since 2018, according to LendingTree’s survey of 1,466 credit cardholders conducted in June.

Just 53% of cardholders said they were confident they could pay their credit card’s monthly balances in full this month, down 10 points from May, and matching the largest monthly decline in nearly four-year history of the Confidence Index.

The drop in confidence cut across all demographics and ages, the survey found, showing that Americans nationwide are feeling the pinch from inflation.

“There's only so long that credit card holders can be expected to manage rampant inflation, rising interest rates, increased spending, and general overall economic uncertainty before they start to struggle a little bit more,” Matt Schulz, LendingTree’s chief credit analyst, told Yahoo Money.

“In the past few months, with how quickly gas prices have risen, and how grocery bills have grown. Those are two things that hit most everybody,” Schulz said. “When those sort of basic fundamental costs of life rise, it ends up taking a big toll.”

An air traveler uses a credit card to pay for items January 28, 2022 at a retail shop in John F. Kennedy International Airport in New York City. (Credit: Robert Nickelsberg, Getty Images)
An air traveler uses a credit card to pay for items January 28, 2022 at a retail shop in John F. Kennedy International Airport in New York City. (Credit: Robert Nickelsberg, Getty Images)

The report also comes as carrying credit card debt is about to get costlier.

The Federal Reserve this month hiked a benchmark interest rate that credit cards track by three-quarters of a point, the largest increase since 1994. In less than a month, the rate on credit cards will follow suit. And the central bank is not done hiking rates, signaling plans to increase rates by another 1.75 percentage points over the next four remaining meetings this year.

It’s especially worrying, since Americans have continued to rack up their credit debt, which jumped almost 20% to $1,103 trillion in April.

“Credit card debt can be a sign of struggle for people who are using cards to make ends meet, but it can also be a sign of confidence as well,” Schulz said. “I don't think there's any question that we're seeing both of those things happen simultaneously right now. It's just a matter of determining which of those factors is driving this more.”

The Boston Red Sox have made transactions at Fenway Park cashless this season. A fan is pictured about to use his credit card at a concession stand. (Credit: Jim Davis, Globe Staff).
The Boston Red Sox have made transactions at Fenway Park cashless this season. A fan is pictured about to use his credit card at a concession stand. (Credit: Jim Davis, Globe Staff).

The weight of inflation hasn’t spared anyone.

According to LendingTree, the sharp decrease in credit cardholder confidence this month wasn’t tied to any specific demographics. The soured sentiment spanned lines of gender, age, and even political parties.

Short-term confidence fell 11 points among women and 10 points among men. Consumer sentiment also plunged across generations — Gen Zers, millennials and Gen Xers all saw dips of 14, 12, and 10 points respectively.

When it comes to political parties – which often gather polarized results – Republicans' confidence fell by 15 points, Democrats by 10, followed by an 8-point decline among independents.

“I wasn't surprised to see confidence drop across the board,” Schulz said. “Because everybody goes to the grocery store. Most people fill up their tank.”

According to the latest Consumer Price Index (CPI) report, the food at home index increased by 10.8% within the last 12 months – the largest increase since November 1980. Earlier this month, gas prices topped $5 nationwide, according to AAA.

“It really reduces people's financial margin for error in a significant way. And that was already relatively small,” Schulz said. “With inflation rising interest rates, it will certainly whittle away at that.”

Although interest rates for credit cards are due to increase in less than a month, you can start paying down your debt now. According to LendingTree, you can start by asking your credit card issuer for a lower rate. (Credit: Getty Images)
Although interest rates for credit cards are due to increase in less than a month, you can start paying down your debt now. According to LendingTree, you can start by asking your credit card issuer for a lower rate. (Credit: Getty Images)

Pay down credit debt now, say experts

If you’re having trouble paying off credit debt now, don’t wait any longer.

With the Federal Reserve poised to increase the benchmark interest rate more this year, credit cards are going to get more expensive. Fortunately, there are ways to address your credit debt before it gets out of hand.

“To combat that, consider getting a 0% balance transfer credit card or a low-interest personal loan,” Schulz said. “Both can help you keep rising interest rates at bay — though you’ll likely need good credit to get the best 0% balance transfer card offers.”

You can also consider calling your current credit card issuer and asking them for a lower interest rate. According to LendingTree, 70% of cardholders that requested a lower APR rate this year have gotten their way.

“There are ways to counteract the Fed increasing your rates, but you just need to take those actions yourself,” Schulz said. “Make sure that you're doing what you need to do to protect your finances and family's money.”

Gabriella is a personal finance reporter at Yahoo Money. Follow her on Twitter @__gabriellacruz.

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