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, customers are nonetheless coping with larger costs initially led to by the COVID-19 pandemic, which resulted in provide chain points and the mismatch between provide and demand. Consequently, regardless of the general higher financial outlook, it seems People entered 2024 on a notice of economic anxiousness.

In lots of instances, it appears as if larger costs have precipitated customers to show extra to bank cards as a prepared means of constructing ends meet. In reality, bank card balances excellent have been rising lately, hitting a excessive of $1.13 trillion for the fourth quarter of 2023, in line 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 isn’t shared equally by residents of every U.S. state. To raised perceive the state-level state of affairs, 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 revenue.

Whereas this examine offers an understanding of the states through which it’s simpler and more durable for customers to repay their bank card debt, it’s in no way a proxy for the monetary well-being of particular person households on the state degree.

Key insights

Key insights on burdened states

  • Louisiana, Mississippi, Oklahoma and West Virginia are essentially the most burdened states primarily based on our methodology, although none of those states have exceptionally excessive common bank card balances.
  • The states which might be most debt burdened don’t essentially have the very best bank card debt balances. Fairly, they’re those the place it takes the longest to repay the cardboard debt, in line with the examine’s guideline of dedicating 5 p.c of the common month-to-month revenue in every state towards that state’s common bank card stability.
  • The least debt burdened state is Massachusetts, adopted by Minnesota, New Hampshire, California and New Jersey. These states typically have middle-of-the-pack bank card balances and excessive incomes.
  • Eight of the ten most burdened states voted for Trump in 2020; 9 of the ten least burdened states voted for Biden.

What can we imply by bank card debt burden?

The purpose of this examine was to establish the states through which bank card debt is simpler to repay, in addition to these the place customers are extra hard-pressed to repay their money owed. Consequently, this isn’t a primary rating of which states have the very best and lowest bank card debt, though that is without doubt one of the main inputs. The typical bank card debt information utilized in our evaluation comes from TransUnion, however extra inputs have been used as properly.

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

Projecting out that 5 p.c of gross month-to-month revenue rule would have households out of bank card debt in two years, assuming they caught to that compensation schedule and didn’t tackle any extra 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 essentially the most debt burdened. In case two states have been tied primarily based on months to repay debt, we contemplate the one which pays extra in curiosity to be extra burdened than the opposite. This is similar methodology that was used within the 2023 model of this examine, printed on our sister web site

Common bank card debt burden by state

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

This information tells a story about every state’s bank card debt burdens. For one, the South doesn’t do properly on this entrance. Louisiana, Mississippi, Oklahoma and West Virginia are among the many most burdened states, primarily based 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, in actual fact.

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 put in the course of the group.

Trying on the information from a political angle, essentially 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.

Easy methods to deal with bank card debt

You might 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 fee on bank card debt has gone up in latest months, reaching 3.1 p.c within the fourth quarter of 2024, in line 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. Which may, as an illustration, maintain you again from saving for a down fee on a home. Amongst different unfavourable penalties, additionally, you will have much less to spend on hobbies and pastimes, since your discretionary revenue shall be eaten up by your card funds.

Whereas it’s typically simpler to repay bank card debt if in case you have the next revenue, I’d stress that everybody can repay bank card debt — and possibly faster than they assume. Even in essentially the most burdened states, by dedicating 5 p.c of gross month-to-month revenue to bank card debt payoff every month, the common family shall be debt-free inside two years.
— Ted Rossman | Bankrate Senior Business Analyst

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

Listed below are another techniques you possibly can undertake to pay down your bank card debt sooner and minimize down on curiosity funds:

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

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


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