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New data appears to suggest Americans are improving on credit card debt, with average balances drastically dropping in 2020, according to the Consumer Finance Protection Bureau (CFPB), and Americans saying they are very confident in their ability. to pay off their credit card. debt, according to a new survey. But some experts attribute the pink board to the pandemic and note that it could be temporary behavior, triggering a change in attitude in the future.
The new GOBankingRates survey reveals a host of positive signs regarding Americans’ credit card relationships.
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First, when asked how they manage their monthly credit card bills, the most popular response for Americans is that they pay it off completely, a response found across all age groups at 44%.
The most surprising, Regarding reaching the credit limit on credit cards, 50% of Americans say they have never done so, with a whopping 72% of Americans 65 and over choosing that answer.
Another key finding from the survey is that 30% of those surveyed report having between $ 0 and $ 100 in credit card debt, while 30% of Americans have between $ 1,001 and $ 5,000 in debt. Only 5.5% report having $ 10,000 or more in credit card debt.
Another positive sign from the survey is that most Americans seem very optimistic about their ability to repay debt quickly. Indeed, 59% of those polled say they believe they will be able to pay off all of their credit card debt at some point in the next six months.
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In addition, 13% of those surveyed think it will take them a few years and more specifically, only a meager 2% think they will never get over their credit card debt.
Breaking down the survey results further, in terms of how Americans handle their monthly credit card bills, the second most popular response is, “I pay more than the minimum, but never the full balance,” with 26% of respondents. Then, 13.38% say they only make minimum payments; 9.12% say they pay as much as they can monthly; 6.54% say they set an amount each month; and only 0.79% say they use automatic payment or a third-party application.
Americans in the 18-24 age group who say they pay “more than the minimum, but never the full balance,” responded the lowest, with 14%, but the figure rose to 36% among the 45- 54 years old. age group, according to the survey.
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âThe 36% number surprises me,â said Bob Armor, marketing director of the M1 Finance money management platform at GOBankingRates. âI would expect it to be much lower, as most of these people probably own property (real estate and investments) and should have access to very low rates through mortgages, home equity loans / lines and wallet lines of credit rather than carrying high interest credit cards, âhe adds.
Nirit Rubenstein, co-founder and CEO of credit repair platform Dovly, told GOBankingRates that the numbers may reflect recent industry data, which suggests that during the COVID pandemic, when more than disposable income was available, people used it to pay off debt.
âHowever, all indicators suggest that this was a temporary behavior,â she said.
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Indeed, a report by the Consumer Finance Protection Bureau found that the decline in credit card debt during the pandemic was unprecedented in speed and scale. Measures of consumer stress, such as the incidence of late payments and the share of overdue accounts, have reached record levels.
Ted Rossman, senior industry analyst at CreditCards.com, told GOBankingRates that while it is true that overall credit card balances have fallen sharply, this improvement has not been shared equally.
Rossman attributes the overall improvement to the fact that many households have used stimulus funds to pay off their debts and have spent less over the past 18 months, which “hides that many households are sadly struggling,” he says. .
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The sentiment is shared by several experts. Jason Vissers, financial and credit card analyst at MerchantMaverick.com, tells GOBankingRates he is not surprised by these results: the fact that credit card debt has declined significantly in the first half of 2020 as the pandemic strike would seem to indicate that for most Americans, credit cards are less a tool of accumulation or extravagance than a means of staying afloat in the face of the rising cost of living.
“And, while the reduced spending opportunities during the pandemic undoubtedly had something to do with it, the fact that people seemed to be using their coronavirus aid to pay off their debts rather than expanding further,” argues the idea that debt is usually incurred need, not desire, âhe said.
The CFPB report also highlights the fact that the onset of the pandemic saw a drop in spending, which may have allowed some cardholders to use those funds to pay off debt.
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“Unprecedented levels of direct government assistance, such as economic impact payments, improved unemployment benefits, and suspensions of payment and interest on student loans held by the federal government may have provided some consumers with income. additional available usable to reduce balances, âaccording to the report.
The report also notes another contributing factor: rather than reducing debt, some consumers may have simply shifted their buying behavior from credit cards to debit cards or other forms of credit, such as Buy It Now. or personal loan products.
In terms of the number of credit cards Americans own, one or two is the most popular answer. Having more than four cards increases with age, with 17% of those aged 45 to 54; and 21% for both the 55 to 64 age group and the 65 and over age group.
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The GOBankingRates survey also reveals that 15.46% of Americans have $ 5,001 or more in credit card debt. What’s more, the survey finds that Americans with the most debt – $ 10,000 or more – are those in the 45 to 54 age bracket, with 8%.
On hitting the credit limit on credit cards, after the 50% of Americans who say they never have, “I already hit my credit limit but not the year last âis the second most popular response, with 19.5% of Americans, followed by 12.78% reporting having reached the limit in the past year.
Finally, another key finding of the survey is that young people think they are too dependent on credit, compared to older respondents.
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âI feel like there is a strong tendency among younger cohorts to take control of their finances and spend within their means,â says Armor of M1 Finance. “Maybe that is what they witnessed in the housing crash with people who were overworked.”
In any case, whatever your age group and whatever the amount of your debts, Dovly’s Rubenstein, says the most important thing to do is make your payments on time.
She recommends that to make sure you don’t forget to make payments on time, you can set up automatic payments or put a reminder in your phone when bills are due. âAvoid borrowing more than 30% of your credit limit on credit cards. Keep an eye on your credit reports and make sure that no incorrect information is reported. Wrong balances or wrong payment statuses can lower your credit score and make it harder for you to approve credit at the best rates in the future, âshe says.
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GOBankingRates surveyed 1,009 Americans aged 18 and over nationwide from September 22-23, 2021, asking twelve different questions: (1) Which of the following is most important to you when it comes to choosing a new credit card? ; (2) How do you manage your credit card bill each month? ; (3) Which credit card company do you trust the most? ; (4) At what age did you get your first credit card? ; (5) What is the main purpose of using your credit card (s)? ; (6) Do any of the following statements apply to you? Select all that relates to it :; (7) What credit card fees do you hate the most? Select one:; (8) How many credit cards do you have? ; (9) What is your total current credit card debt? ; (10) How long do you think it will take you to pay off your credit card debt? ; (11) Have you ever reached the credit limit on your credit card? ; and (12) Have you ever charged any of the following to your credit card? Select all that apply: All respondents had to pass a screening question of: Do you own / use one or more credit cards ?, with a âYesâ answer. GOBankingRates used PureSpectrum’s survey platform to conduct the survey.