A State-By-State Look At Credit Card Debt In America

If you are struggling with credit card debt, where you live may have a significant influence on your financial picture. The cost of living varies greatly from state to state, and each state’s individual economy has its own unique dynamics and influences. Local economic factors such as energy costs, real estate values, and a state’s geographic location can have a large influence over its economy and therefore the consumers who live there.

Credit card debt in America is growing. In fact, as of the end of the first quarter of 2017, all consumer debt is at an all-time high, beating the previous high that occurred during the financial crisis of 2008. With the economy showing signs of life after years of stagnation, and lenders relaxing their lending standards, there is a lot more credit available today than there has been in the past decade. This is paving the way for Americans to spend money and borrow for big-ticket items such as homes and cars. This will contribute to the country’s overall economic growth but also to consumer debt, including credit card debt.

As mentioned, the cost of living varies considerably from state to state, as do the local economic factors that influence how consumers spend their money. Consequently, credit card debt varies from state to state as well. Let’s look at some of these economic factors, as well as how they affect states with high and low average credit card debt.

States with the highest credit card debt: Top 5

1. Alaska

With a very high cost of living, Alaska tops the nation in credit card debt. Because of its remote location, the cost of getting goods to Alaska is very high, which in turn drives up the cost to the consumer. This translates to expensive food, household items, vehicles, and just about every other type of good. Additionally, Alaska has a high unemployment rate, which leads to a higher dependence on credit cards to make ends meet. Much of the work in Alaska is seasonal work, which makes it difficult for citizens to afford the high cost of living there.

2. Connecticut

With an economy that continues to struggle, Connecticut has the second highest credit card debt in the nation. Connecticut’s job market has been stagnant for years, a key economic factor that influences the amount of debt consumers carry. However, according to this article, Connecticut’s worst issue is its flat GDP, which, as of the end of 2016, was $15 billion below its peak in 2007. Connecticut’s housing is very expensive compared to other states, as are energy, groceries, and transportation. Clearly, these detrimental economic factors have played a big role in the state’s credit card debt problem.

3. Virginia

Virginia has a healthy and robust economy in comparison to other states. Unemployment is lower than the national average, even through the tough times of the last few years. However, while the economy is riding high, so are home prices. Virginia has some of priciest real estate in the country, and rent is high too. With high food, energy, and transportation costs, Virginia works out to be an expensive place to live, overall. This is, most likely, why Virginians with lower paying jobs tend to use credit cards to fall back on when their cash flow falls short.

4. New Jersey

New Jersey was hit hard during the Great Recession beginning in 2008, and it has only recently started to show signs of coming out of the doldrums. Unemployment has finally begun to improve, but a remaining high cost of living makes The Garden State a tough place to make ends meet. New Jersey’s high cost of real estate and soaring property taxes have made for a difficult consumer environment. Factoring in high transportation and energy costs, New Jersey has put its citizens on the map for some of the highest credit card debt in the nation.

5. Maryland

Maryland has a diverse economy grounded in technology, science, international trade, and manufacturing. With its professional and technical workforce constituting over 28% of its overall workforce and median household income at the highest in the nation, there is plenty of discretionary income available to make economy-boosting purchases of homes, cars, and other expensive items. Where there is lots of buying, there is also a high degree of credit card debt. It isn’t always poor economic factors that lead to high consumer debt.

So, while good and bad local economies can produce a high average household credit card debt, what drives a low average household credit card debt? It may not be what you think. Let’s look at the states that have the lowest average credit card debt and what economic factors might be driving their lower balances.

States with the lowest credit card debt: Top 5

1. Iowa

Iowa has the lowest average credit card debt in the country. It has a stable economy rooted in agriculture, low unemployment, and an abundance of affordable housing. The cost of living in Iowa is very favorable and much lower than your average U.S. city. In every metric, from food to utilities to transportation, Iowa is less expensive than the average city. Its Midwestern lifestyle combined with a high quality of life standard enables folks living there to make ends meet, and be happy doing it. This means that people living in Iowa usually don’t depend on credit cards to manage their monthly budget. Living within their means and saving money are central to their Midwestern values.

2. North Dakota

North Dakota’s economy is booming. The oil and natural gas resources there are fueling a large economic expansion that includes numerous jobs. While housing and other cost-of-living metrics are on par with the rest of the country, transportation and utilities are economical. Although 90% of North Dakota’s land is still dedicated to farming and agriculture, only 20% of the jobs are in this segment of the economy, according to this report. The job market in North Dakota is expected to grow over 36% in the next 10 years. North Dakota’s promising economic picture makes it an environment that does not promote overspending and therefore high credit card balances.

3. Mississippi

This state’s economy is driven by agriculture and manufacturing. In addition, while it has the third-lowest credit card debt average per household, it is likely because a large portion of the population is unable to qualify for high lines of credit. The people of Mississippi are plagued with one of the highest rates of medically uninsured and underinsured in the nation. Consequently, this state carries the highest amount of medical debt among states. In fact, according to this recent article, almost 40% of adults under the age of 65 have medical debt. The surprising part is that most of those carrying debt are not necessarily poor, but rather are members of the middle class.

4. Wisconsin

Wisconsin’s economy is underpinned by its robust dairy industry that accounts for the largest segment of it economy, a whopping 54%. Other agricultural segments exist, in part, to support the dairy industry. This includes Wisconsin’s most important crop, which is corn, grown for grain primarily to feed the livestock in the state. Wisconsin is also the nation’s leading producer of cheese.

The state has made a concerted effort over the last few years to bring in new business, and it has been successful in creating enough jobs to bring it from number 49 to number 23 in forecasted job growth, according to Forbes. Additionally, Wisconsin is expected to grow average household income significantly over the next five years. With lots of expendable income and a firm set of Midwestern values, citizens of the state have been able to keep their average credit card balances low.

5. Kentucky

Kentucky’s economy is not great. In fact, this recent report shows it to be among the worst in the nation. For annual household median income, it ranked a dismal 48. So, how does Kentucky sport one of the lowest averages of household credit card debt? Kentucky has very strict laws protecting consumers from getting into debt under false or misleading practices. This means many disclosures are necessary, which are likely to discourage many from going into debt. In addition, Kentucky has a large portion of its population at the bottom of the income scale, and these consumers are unlikely to receive high lines of credit from credit card companies.

Other factors that influence debt levels

Aside from the state-by-state economic factors, other factors influence debt levels in America, especially credit card debt. One of the biggest factors is the inability of many Americans to budget their money and live within their means. Lack of savings plays a large role in the accumulation of credit card debt. With no money in the bank to fall back on, many Americans are unprepared for unexpected financial emergencies and must rely on credit cards to get by.

Sometimes, life takes a significant turn and a consumer may be out of work due to an injury or illness. Aside from the lack of income, medical bills such as those stemming from deductibles, co-pays, and prescriptions can throw finances into chaos. Under these circumstances, many have no choice but to turn to credit cards to survive.

Unemployment due to job loss can have devastating effects on a family’s financial well-being if the income is not replaced quickly, as stop-gap measures such as unemployment compensation generally fall way short of covering bills. Separation and divorce can also wreak havoc; expenses usually double as households split into two.

All of these factors play a role in the rising debt levels in America. Some are under the control of the consumer, but many are not. Those that are unable to get their debt under control sometimes have few options if they do not act soon enough. Rather than filing for bankruptcy, consumers should first seek other ways to address their debt such as debt consolidation or a personal loan. If these solutions are not available to them, perhaps they should consider working with a debt relief company such as National Debt Relief to get their debts settled with their creditors.

If you are interested in seeing where your state falls in the average credit card debt picture, look at the chart below. In addition, if you are carrying significant debt, take steps today to get it under control so you can be sure to take advantage of all of your options.