Poll: If pandemic continues, 62% of credit card debtors may miss payments

According to a CreditCards.com poll, 62% of people with credit card debt said they won’t be able to make the minimum payments in the next three months if the pandemic keeps going. Poll: If pandemic continues, 62%

The new survey, done in mid-July, shows that 61% will be affected if they can’t work now or in the future, 56% if there is no more government stimulus money, and 26% when the $600 weekly supplemental unemployment benefits end.

Millennials are the most worried about being in debt. 87% said they won’t be able to make the minimum payments if they can’t work, 79% said they won’t if COVID cases keep going up, 72% said they won’t if there are no more government stimulus payments, and 47% said they won’t when the extra unemployment benefits end.

Ted Rossman, an industry analyst for CreditCards.com, said, “So far, I’m pleasantly surprised that so few people have fallen behind on their payments during the pandemic.” Poll: If pandemic continues, 62%

But he warned that these numbers have been helped by a lot of government stimulus and lender hardship programs.

The fact that there haven’t been any delinquencies yet may not be real. The end of the stimulus will only delay, not stop, the rise in delinquencies.

Rossman said, “We need to stay tuned because Congress and the White House are working on another round of possible stimulus. This situation could change in the next few weeks.” Poll: If pandemic continues, 62%

Credit card debt poll: Key findings

Here’s what else our poll found about credit card debt in the pandemic:

• Millennials are adding the most debt: twenty-five percent of credit card debtors have taken on more debt as a direct result of the pandemic—a figure that rose from 23% in mid-April— and 39% of millennial credit card debtors have added to it, up from 34% in mid-April.
• More than half of adults have personal debt: Sixty-six percent of U.S. adults have personal debt: 36% have credit card debt, 25% have mortgages, 24% have auto loans or leases and 14% have student loans. Some of these figures are down a bit from CreditCards.com’s January 2020 debt-free living poll (70% had personal debt, 41% had credit card debt, 26% had mortgages, 26% had auto loans or leases and 16% had student loans).
• Despondency among debtors: Survey respondents’ optimism about getting out of debt has declined slightly from our January survey – 9% of debtors expect to die in debt and 8% don’t know when they’ll be debt-free, compared with 7% for each in the prior survey. In a 2019 survey, 25% of debtors expected to die in debt, and in 2018, 30% said the same. The most recent survey revealed that 43% of debtors expect to be debt-free within five years, compared with 45% in the January survey. Poll: If pandemic continues, 62%

Pessimism about getting out of debt is relatively low

Martin Lynch, compliance manager and director of education at Cambridge Credit Counseling, said he thought the number of people who said they would likely die in debt is low.

He expected that with the increased debt being taken on and no foreseeable end to the pandemic, many more people would be pessimistic about carrying debt to the grave.

“It might be a case of whistling past the graveyard, or it may be a sign that American consumers are resolving to resume paying down debt as soon as this crisis passes,” Lynch said. Poll: If pandemic continues, 62%

Credit card debt has gone down

Most people are spending less during the pandemic, and if they can afford it, they’re making special efforts to pay down debt, Rossman said.

It’s basically like a New Year’s resolution on steroids, because they’re concerned about the economy and job security, he added. Poll: If pandemic continues, 62%

Credit card spending was down about 40% year-over-year in late March and early April, and it’s still down about 10% now, per JP Morgan Chase.

And Rossman also noted that these trends have combined to roll credit card debt back three years – the total fell about 10% from February 2020 to May 2020, according to the most recent Fed data on consumer credit. Poll: If pandemic continues, 62%

Still, the gap between the haves and have-nots is widening, Rossman pointed out.

“While a lot of people are paying down credit card debt, others are in a tough spot if they don’t have enough money coming in and alternatives are dwindling,” he said. “It’s hard to get a new job right now, and the market for balance transfer cards has dried up.” Poll: If pandemic continues, 62%

And Lynch pointed out that that federal and private student loan payment holidays have helped millennials stay afloat to this point, but those forbearances are also temporary – these line items will be back in borrowers’ budgets by the end of September.

The $600 supplemental unemployment benefit expired in July, which could leave a lot of workers in dire straits, Lynch said. Poll: If pandemic continues, 62%

Millennials have been hard hit by job loss

Maureen Kelley, a certified financial therapist practising in Denver, said these statistics accurately reflect some of the emotions her clients have been sharing.

Many people have been thoughtful and diligent in managing their debt during this period – generally, stimulus checks are being used to supplement and sustain household cash flow, she said. Poll: If pandemic continues, 62%

Anxiety is high due to ongoing uncertainty, particularly among millennials affected by job loss, according to Kelley.

For example, one of her clients, a 38-year-old hospitality worker, had intentionally taken control of her finances.

At the end of 2019, she made a financial plan, established a budget, reduced debt and set realistic goals that included improving her credit score and making a commitment to herself to change her spending behavior.

But she’s been out of work since March. Now she’s receiving unemployment cheques and is highly anxious over what the next weeks and months will bring. Poll: If pandemic continues, 62%

The client is deeply disheartened by the prospect of losing all her hard work and returning to where she began more than a year ago.

Even worse, she fears she may have no choice but to put more expenses on credit cards and incur more debt.

Remember that you’re in control of your money

Individual reactions to financial stress differ greatly – when fear and anxiety are high, some people avoid and deny the issue and, in worst-case scenarios, engage in catastrophic thinking, Kelley said. Poll: If pandemic continues, 62%

According to Kelley, those who successfully navigate financial stress share a few common traits: They take control of the little things, are aware of their spending, seek guidance from credit card companies or advisors, and keep a positive attitude toward money. Poll: If pandemic continues, 62%

Even through uncertainty, they choose to not get bogged down by thoughts of never getting out of debt and know that the situation will pass.

“It is important to believe that you are in control of your money, rather than letting it control you.

Millennials might drive credit card debt accumulation

According to the Fed, the first quarter of 2020 saw near-record paydowns on credit card accounts— a remarkable statistic given the high amount of debt taken on in 2019, Lynch said. Poll: If pandemic continues, 62%

“The pay-down trend was brought to an abrupt halt by the pandemic, of course, which is why I think the increase from 34% to 39% is a harbinger of what we’ll see through year’s end,” he added.

Lynch believes we’ll easily surpass the $76 billion in new credit card debt taken on in 2019.

He also thinks that millennials in particular will be driving the accumulation of credit card debt because they have the most complicated budgets.

For instance, Lynch said, they may have just purchased a home but have little ebquity. Many are still paying for childcare or have student loan balances, and some may have begun to care for aging or ill parents. Poll: If pandemic continues, 62%

“The list of budget demands goes on and on for this demographic, and they aren’t old enough to have built enough savings to withstand anything like the economic hit they’re taking right now,” Lynch explained.

Pay your debt down faster

If you’re in credit card debt it’s not the end of the world.

There are plenty of ways to pay it down faster – here are some tips to help:

• Try to negotiate a lower interest rate with your card issuer.
• Consider getting a balance transfer card with a 0% intro APR and transferring your balances onto it – then, make sure you pay off the balance before the interest rate kicks in. Poll: If pandemic continues, 62%
• If you don’t want another card, pay off your highest-interest card first with extra cash and make the minimum payments on your other cards.
• Try to pay cash for purchases instead of using your cards.
• Create a budget to help you cut out unnecessary expenses.

Survey methodology

CreditCards.com commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,372 adults, including 1,230 adults with personal debt. The survey was conducted online from July 15-17, 2020. Poll: If pandemic continues, 62%