Americans appear to be feeling more confident in their finances – at least with respect to their credit card payments.
According to a new survey from CompareCards.com, more Americans are paying their credit card bills in full. As of January 2019, 39% of survey respondents paid all credit card bills in full over the last six months and 69% paid at least half of their bills in full over the same time period.
"It's great news that more Americans are paying their card statement balances in full each month," said CompareCards.com Chief Industry Analyst Matt Schulz. "Job No. 1 for anyone with a credit card is to pay your balance off as soon as possible, and it's a positive sign that more Americans are able to do that every month."
If consumers follow through on their survey statements, momentum for full payments will keep growing.
Almost half (48%) of respondents are very confident they will pay all credit card bills in full for the current month's billing period – and the future looks even brighter. Credit card users expect to pay all monthly credit card bills in full two-thirds of the time over 2019, with remarkably consistent responses across all age groups.
Almost two thirds of respondents (63%) expect to pay credit card bills in full more often in 2019 than in 2018, with 40% expecting to pay in full "much more often."
The number of consumers making full credit card payments over the previous six months has been trending up slowly but steadily, gaining six percentage points between the September 2018 and January 2019 CompareCards.com surveys.
Unfortunately, the percentage of consumers that made no on-time payments in the last six months stayed relatively constant, fluctuating around the 20% mark. That could indicate that up to one-fifth of Americans are caught in a debt trap – unable to catch up because of compounding interest charges from regularly unpaid balances.
When unchecked, this can lead to a debt spiral where you can't even afford to pay the interest on your spending, much less your next credit card bill. Without a new source of income, you could be forced into defaulting on your debts and possibly declaring bankruptcy.
The debt spiral example shows why you should pay your credit card bill in full each billing period. You'll save money in several ways. Not only will you avoid interest charges, you'll maintain your grace period on purchases for the next billing cycle. (Without the grace period, interest begins to accrue on transactions from the time of purchase – a seemingly small difference that can rack up big costs.) If you want to reduce your interest payments and lower your debt, join MoneyTips and use our free Debt Optimizer tool.
While an increasing number of Americans are avoiding interest charges by making payments in full per the survey, that may be due to our currently strong economy. Should the economy flatten out or tank, we're likely to see a decrease in full credit card payments. The optimism will evaporate for making eight out of twelve monthly payments in full this year.
"It's troubling that so many Americans are still battling debt, even during good economic times," Schulz said. "When you're piling up debt during good times, it means you're probably not putting enough money away for a rainy day. That means that when the economy eventually turns south, things might get pretty ugly pretty quickly."
Why not assume that rougher times are coming and plan ahead to keep full payment records intact?
If you want to pay credit cards on time more often – or at least not fall behind during tougher economic times – you must control your spending. Review your budget and expenses over the past few months (and if you don't budget or track expenses, start now). Did unexpected expenses push you beyond your budget, or did you just overspend without paying attention?
Either way, the solution is the same. Find enough spending cuts in your budget to leave a monthly surplus. Use that surplus to create an emergency fund. Your emergency fund becomes a buffer to allow you to make full payments even when unplanned expenses arise.
Be a part of the 2019 full credit card payment trend. Let credit card companies figure out some other way to make money instead of charging you interest.
"Make 2019 the year you focus on knocking down that credit card debt in earnest," Schulz said. "It's only going to get more expensive and take longer to pay off if you don't do something, so take action today."
If you want more credit, check out our list of credit card offers.
