Consumers Are Struggling to Pay Their Credit Card Bills on Time, J.D. Power Finds

Consumers may not be racking up more revolving credit card debt than they did in 2023, but their ability to pay their bills on time is coming under pressure, according to a report released early Thursday by J.D. Power and Associates.

Consumers say they are having a harder time paying their bills, including their credit card bills, on time in 2024 than they did in 2023, the report says. On a five-point scale, consumers’ ability to pay their bills on time fell to 4.26 in 2024 from 4.29 a year ago.

Issuers of bank-branded and co-branded cards with no annual fees have seen the steepest decline in cardholders’ ability to pay, the report says. By contrast, issuers that offer products centered on helping consumers build their credit scores are seeing fewer late payments, the report says.

J.D. Power measures financial health by considering consumers’ spending-to-savings ratio, creditworthiness, and safety-net items, such as insurance coverage.

Another factor influencing the uptick in late payments is that many consumers are finding their income no longer goes as far as it once did. “Cardholders are reporting less of the ability for income to cover spending and lower levels of savings than in prior years, all of which impacts their ability to cover monthly financial obligations,” John Cabell, managing director of payments intelligence for J.D. Power, says by email.

One way for card issuers to reduce late payments is to attract more customers looking to consolidate or pay down their debt. These customers tend to be more financially healthy, according to J.D. Power. To achieve that goal, issuers can build awareness for their debt-management tools, the researcher says.

“Issuers should make [debt-management] tools readily available in digital channels and provide proactive communications to cardholders to build awareness and engagement of debt-management tools,” Cabell says.

Among financially healthy cardholders, those with airline-rewards cards tend to be the healthiest. Some 40% of airline-rewards cardholders have revolving debt, compared to 51% of cardholders without airline-rewards cards.

“Rewards products tend to attract people who are transacting to accumulate points, miles, or cashback. These consumers also tend to have less revolving debt and are therefore more influenced by the allure of rewards than low interest rates,” Cabell says. “Many cardholders with debt use value cards as their primary card, which have no rewards, no annual fees, and have low interest rates and balance-transfer features.”

Large issuers have the resources to offer richer rewards, which attract financially healthy customers and in turn puts smaller issuers that can’t offer similar rewards at a disadvantage.

Or, as Cabell sums it up: “The largest issuers tend to have prominent, attractive rewards cards that attract financially healthy consumers for primary card use. As a result, smaller issuers have fewer financially healthy card customers and a larger customer base using value cards.”