Last updated on June 22nd, 2020
The financial impact of the coronavirus pandemic appears to be subsiding – at least according to credit cardholders. Per two recent reports, consumers are feeling more confident in their ability to repay their credit card statements. They are also turning away from relief programs and forbearance offers. Here’s what you need to know about rising consumer confidence in credit cards.
Sales Rise as Enrollment in Credit Card Relief Programs Is Falling
The recent retail statistics were welcome news to many U.S. companies. Retail sales rose 17.7% in May, after falling nearly 15% in April. While this significant rise during May 2020 is 6% down from the same period last year, it still highlights a potential end to the financial misery of COVID-19.
The new sales figures correlate with a sharp decline in the number of Americans enrolling in forbearance programs. Many banks are giving cardholders the chance to skip credit card payments for a month or more – often with no additional interest charges. Similar programs also exist for renters, mortgages, and other types of bills.
Related Article: Updated Coronavirus Credit Card Relief Contact Information
According to a report from Consumer Affairs, enrollment in these programs rose by 25% between March and April. This trend is subsiding, however, as more Americans are forgoing these relief programs for regular payments.
Discover CEO Roger Hochschild notes that 80% of Discover cardholders enrolling in their coronavirus relief program returned to regular payments the next month. Another study indicates that half of U.S. consumers feel very confident in their ability to pay their credit card balance in full this month – a sharp increase.
What Is Causing a Rise in Consumer Confidence?
What is responsible for this uptick in consumer confidence? Easing restrictions on business closures is a likely cause, as are the CARES Act stimulus checks. As financial hardships continue to be felt, however, the long-term impact of these reports remains to be seen.
The Prime Rate cuts from the Federal Reserve may also be playing a role. These reductions are lowering the interest rates many consumers pay on their credit cards by several percentage points.
Related Article: Fed Rate Cuts: Should You Refinance Your Credit Card Debt?
Skepticism Remains – Especially in Women
The optimistic data from these studies also has a flip side. Fifteen percent of respondents indicate they have no confidence in their ability to pay their credit card bills. This rate is the lowest level of confidence since May 2019. This faith in credit also skews significantly towards men, with women having the same level of confidence as in April – just 45%. Almost all respondents blame the COVID-19 pandemic for their economic plight.
Tips for Managing Your Credit Cards and Finances
Though confidence is growing, it is critical to keep an eye on your finances during the pandemic. Credit cards should not be relied upon for covering bills if you cannot afford to repay them by the next billing statement.
Instead, your best course is to set a modest budget and reduce your overall expenses on non-essentials like entertainment and dining out.
Other useful tips include:
- Renegotiate your bills with utility companies, mobile phone providers, and other services
- Monitor your credit score through free services
- Separate your business and personal credit
- Consider refinancing existing credit card debts
Related Article: How to Manage Credit Card Payments During the Coronavirus