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If You Live in One of These States, You Probably Have Terrible Credit Card Debt

If You Live in One of These States, You Probably Have Terrible Credit Card Debt

At a Glance

Some states are struggling more than others regarding credit card debt. Read on to discover which states are struggling the most, why, and what you can do about it.

What to expect:

Which states have the most debt?

A new study released by WalletHub shows that Americans now owe over $1 trillion in credit card debt. The study determined which states had the “least and most sustainable” credit card debt by looking at the average debt per person, the cost of paying off that debt using an APR of 16.7%, and the length of time to pay off the debt using the median monthly payment for the state.

The top three states were Alaska, Washington, D.C., and Washington State. Alaska had a median credit card debt of $3,206, which would take 17 months and 27 days to pay off. Just shy of a year and a half to pay off thousands in credit card debt costs $392. In contrast, the state with the most sustainable credit card debt was Mississippi. These residents still had a median of $1,806 in credit card debt, which takes nine months and 18 days to pay off. Interestingly, they found that Mississippi had the lowest median earnings for full-time workers while Washington, D.C., had the highest.

Here are the Top 10 states for worst credit card debt.

Rank State Median Credit Card Debt
1 Alaska $3,206
2 District of Columbia $2,788
3 Washington $2,471
4 Vermont $2,181
5 Wyoming $2,324
6 Oregon $2,208
7 Montana $2,227
8 New Hampshire $2,372
9 Massachusetts $2,344
10 Colorado $2,646

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Others does not include mortgage

How debt has changed over the years

Credit card balances were paid down at record levels in 2020, mainly due to government assistance in response to the COVID-19 pandemic. However, as aid stopped, these balances began to shoot back up. It’s not all bad news – even though we are experiencing a rise in credit card debt because of inflation, the average credit card balance from the fourth quarter of 2017 to the fourth quarter of 2021 decreased by 10.7%. Alaska, the state with the least sustainable credit card debt, had the most significant decrease of 16%. At the end of 2021, Americans carried an average of $5,589 in credit card debt, not to mention student loans and other forms of debt.

We regularly see credit card debt fluctuate, but to make a meaningful impact on the overall numbers, we need higher wages and a lower cost of living. Personal responsibility is essential when it comes to credit cards, but ideally, people will be able to pay off everyday purchases before they start accruing interest.

The role of staggering inflation

According to a report by the Federal Reserve Bank of New York, credit card balances across the country increased by $46 billion in the second quarter, which runs from April through June. Clearly, higher costs of living due to inflation require Americans to borrow more than ever. This marks a 13% year-over-year increase from the second quarter of 2021 to the second quarter of 2022, the highest jump in over 20 years.

During this period, gas prices reached a national average of over $5 a gallon, and inflation was up a staggering 9.1%. These factors likely played a pivotal role in the jump in spending and debt. There were also 233 million new credit card accounts in the second quarter, which has not been seen since the 2008 recession. Total household debt is $2 trillion higher than before the pandemic, wiping out all the strides made by government assistance programs. The only positive from the report shows that delinquency rates on accounts are still at pre-pandemic levels, indicating that Americans are keeping up the best they can.

Unfortunately, credit cards are convenient and easy but do not contain information on how to be responsible while using them. Compounding interest and the high cost of living make it simple for Americans to drown in debt.

Best ways to pay off debt

There are plenty of ideas on the best ways to pay off debt, but two mindsets are the snowball and avalanche methods. In short, the snowball method says that you should order all your debts from smallest to largest and start with the smallest debts regardless of interest rates. Fully pay it off, then move to the next, like a snowball. On the flip side, the avalanche method says to start with your largest debt first.

Both methods are great ways to pay off multiple debts but come with different benefits. You get to see small victories when paying off small debts with the snowball method, but you might save more on interest when you use the avalanche method. If neither method works for you, you can try a hybrid approach by categorizing small and large debts differently. For instance, use the snowball method for debts under $1,000 and the avalanche method for debts over $1,000.

Read more: How to pay off credit card debt fast

Bottom Line

Paying off debt can be a scary and frustrating experience. Debt is too easy to collect but not very easy to pay down. At least you know that you are not alone – plenty of people throughout the country are dealing with the same thing. Sit down and plan how to adjust your spending and which method works best to pay off your debts. Every payment to a credit card is a step in the right direction so try not to get discouraged.