Research and Statistics

Positive card habits up, negative ones down


Americans pay their credit card bills in full more often, and avoid costly behavior, a six-year survey series finds

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Over the past six years, the percentage of Americans paying off their credit card balances every month has continued to climb. At the same time, fewer cardholders report behaving in ways that incur expensive fees and interest charges. In short, good credit card behavior is up, bad behavior is down.

The findings come from the FINRA Investor Education Foundation, which has conducted its National Financial Capability Study three times over the past six years. In the study’s first wave, using 2009 surveys, only 4 in 10 Americans reported paying off their card balances every month. That proportion climbed to 49 percent in 2012 and surpassed the majority mark with a 52 percent reading in 2015.

Meanwhile, the rate of five negative habits that trigger interest and fees all declined over the six-year study period. The most common of these is carrying a balance, which 56 percent of the 2009 respondents reported doing at least once in the previous year. The number of Americans carrying a balance dropped below half in 2012, and even lower, to 47 percent, in 2015.

Making only the minimum payment and paying late also showed significant drops from 2009 and 2012 levels. Currently, about a third of Americans report paying just the minimum at least once during the previous 12 months, down from 40 percent six years ago. And the share who indicate they made one or more late payments was cut almost in half, from 26 percent in 2009 to 14 percent last year.

The number of Americans who said they made charges beyond their credit limit and incurred an over-limit fee, along with those who took a cash advance on their card, also dropped from 2009 levels, but have held steady at roughly 1 in 10 since 2012.

Good news not universal
To better understand who is engaging in expensive card behaviors, FINRA also delineated the overall population of cardholders – of whom 39 percent reported at least one negative incident – into three sets of demographic breakdowns. Their finding: The young, those with low incomes and African-Americans have the hardest times avoiding expensive card habits.

Younger respondents and those with the lowest incomes registered the highest rates of costly card behavior, at just over half for millennials (age 18-34) and nearly half of those with incomes below $25,000. In contrast, only about a quarter of baby boomers and those with incomes above $75,000 reported a negative card behavior in the previous year.

In terms of racial demographics, Asians were the least likely to trigger fees and interest, at just 30 percent, while African-American cardholders showed the highest incidence rate, at 56 percent.

“This research underscores the critical need for innovative strategies to equip consumers with the tools and education required to effectively manage their financial lives,” said FINRA Foundation Chairman Richard Ketchum. “My hope is that policymakers, researchers and advocates will use these findings to make more informed decisions about how to best reach underserved populations.”

FINRA’s National Financial Capability Study is based on nationwide online surveys of more than 25,000 American adults in each of its three phases, with data weighted to represent the demographics of the national population. The latest survey was conducted from June to October 2015, with its findings released July 12, 2016.

See related:Cash advance study: Convenient cash is costly, More infographics

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