Survey: U.S. States Unequally Burdened By Credit Card Debt

Regardless that it seems just like the U.S. has managed to dodge a recession heading into 2024, shoppers are nonetheless coping with larger costs initially caused by the COVID-19 pandemic, which resulted in provide chain points and the mismatch between provide and demand. Consequently, despite the general higher financial outlook, it seems People entered 2024 on a word of monetary nervousness.

In lots of instances, it appears as if larger costs have brought about shoppers to show extra to bank cards as a prepared means of creating ends meet. In reality, bank card balances excellent have been rising in recent times, hitting a excessive of $1.13 trillion for the fourth quarter of 2023, in accordance with the Federal Reserve Financial institution of New York.

However whereas which may be true of the nation as an entire, the burden of bank card debt shouldn’t be shared equally by residents of every U.S. state. To raised perceive the state-level scenario, Bankrate carried out a examine rating every state’s bank card debt burden, bearing in mind every state’s common bank card stability and common family earnings.

Whereas this examine offers an understanding of the states by which it’s simpler and tougher for shoppers to repay their bank card debt, it’s under no circumstances a proxy for the monetary well-being of particular person households on the state stage.

Key insights

What will we imply by bank card debt burden?

The purpose of this examine was to establish the states by which bank card debt is less complicated to repay, in addition to these the place shoppers are extra hard-pressed to repay their money owed. Consequently, this isn’t a fundamental rating of which states have the very best and lowest bank card debt, though that is likely one of the major inputs. The typical bank card debt knowledge utilized in our evaluation comes from TransUnion, however further inputs have been used as effectively.

We’ve additionally considered Census knowledge on common family incomes to gauge general debt burdens. As an illustration, it’s typically simpler to repay $5,000 in bank card debt in case you make $100,000 yearly than it’s to repay that very same quantity of debt in case you solely make $50,000 per 12 months. On this examine, we’ve assumed that 5 % of the typical household’s gross month-to-month earnings goes towards bank card debt, based mostly on a situation by which cardholders are making greater than their minimal funds month-to-month, however not fairly paying off their total card stability. In reality, Bankrate knowledge exhibits that 44 % of cardholders carried a stability from month to month in January 2024.

Projecting out that 5 % of gross month-to-month earnings rule would have households out of bank card debt in two years, assuming they caught to that reimbursement schedule and didn’t tackle any further debt.

Lastly, we sorted state debt burdens by the variety of months required to repay their common bank card debt. We contemplate the states that took the longest to repay the debt probably the most debt burdened. In case two states have been tied based mostly on months to repay debt, we contemplate the one which pays extra in curiosity to be extra burdened than the opposite. This is identical methodology that was used within the 2023 model of this examine, printed on our sister website CreditCards.com.

Common bank card debt burden by state

Use this interactive chart to see how every state measures up in every class.

This knowledge tells a story about every state’s bank card debt burdens. For one, the South doesn’t do effectively on this entrance. Louisiana, Mississippi, Oklahoma and West Virginia are among the many most burdened states, based mostly on our methodology. Whereas these states don’t have very excessive common bank card balances in comparison with different states, all 4 have very low common incomes — rating among the many seven lowest, the truth is.

The least burdened states in our examine are Massachusetts, Minnesota, New Hampshire, California and New Jersey. These states typically have excessive incomes, whereas their bank card balances have a tendency to position in the midst of the group.

Wanting on the knowledge from a political angle, probably the most burdened states appear to lean in the direction of Donald Trump, with eight of the ten most-burdened states voting for him in 2020. Then again, the least burdened states appear to lean Democratic, with 9 of the ten least burdened states (plus Washington, D.C.) voting for Joe Biden.

Learn how to deal with bank card debt

Chances are you’ll be carrying an excessive amount of bank card debt your self if you end up unable to service your debt and sustain together with your card funds. In reality, the general delinquency price on bank card debt has gone up in current months, reaching 3.1 % within the fourth quarter of 2024, in accordance with the Federal Reserve Financial institution of New York.

Carrying the burden of extreme bank card debt means you should have much less cash to place in the direction of financial savings. That may, as an illustration, maintain you again from saving for a down cost on a home. Amongst different unfavourable penalties, additionally, you will have much less to spend on hobbies and pastimes, since your discretionary earnings will probably be eaten up by your card funds.

Then again, in case you solely make minimal funds towards the typical bank card stability ($6,140) on the common rate of interest (slightly below 21 %), you’ll be in debt for greater than 17 years, Rossman factors out.

Listed here are another ways you possibly can undertake to pay down your bank card debt sooner and lower down on curiosity funds:

• Join a stability switch card or a card with a 0 % promotional interval.
• Flip to debt aid methods akin to working with a good nonprofit credit score counseling company.
• Tackle a facet hustle, akin to changing into a canine walker or rideshare driver.
• Promote objects you don’t want or lower down on bills, maybe by canceling a streaming service you don’t use lots.
• Use an upcoming money inflow you’re anticipating, akin to a tax refund, to make inroads into your debt.

Shifting to an space with larger common salaries might also assist, although that’s not an choice for everybody — and better salaries could include larger prices general.

Methodology