| January 29, 2016

Research of the Week: Credit Card Use across America

Credit card debt and credit utilization statistics from around the U.S.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

No matter how you feel about them, good or bad, credit cards are a pivotal part of our financial system. For some they’re helpful tools that provide flexibility and convenience in our financial lives that helps build a better credit score. For others they’re a root of financial evil and a fast track to financial distress.

So how exactly are Americans opening credit card accounts and using them across the U.S.? In this Research of the Week, we’re looking at state-by-state credit card data of 2.5 million users of Credit Sesame. We focused on five points from Credit Sesame’s data:

  1. Average number of credit cards
  2. Average credit card debt level
  3. Average credit card limit
  4. Average credit utilization percentage
  5. Percentage of over-limit accounts

The big result

Here are the highs and lows for all five factors:

  1. Residents of New Jersey have the highest average number of credit cards at 5.5, while Mississippians have the lowest at 3.7 cards.
  2. Residents of Hawaii have the highest average debt levels at $6,812, while Mississippians have the lowest average debt level at $3,364.
  3. Not surprising since they have the most average number of cards, New Jersey residents also have the highest average credit limit at $25,293, while Mississippians have the lowest average total limit at $10,111.
  4. However, in spite having a low number of cards and a low debt level, Mississippi residents have the highest percentage of credit utilization at 65.7 percent. Residents in Utah have the lowest utilization at 47.6 percent, although New Jersey was the second lowest at 48.2 percent.
  5. Finally, Mississippi residents also have the most cards that have been charged over limit at 19.5 percent – that’s roughly one in five accounts that’s gone over its limit. Utah has the fewest cards over limit at 9.8 percent of the cards in use.

The fascinating details

These are the national averages for all five points:

  1. The average American credit user has 4.4 credit cards
  2. The average American credit user has $4,557 in credit card debt
  3. Their total available credit limit is $17,068
  4. As a result, the average American is using 55.3% of their available credit
  5. Finally, 12.9% of all credit card accounts nationally are over-limit

There are only four states in the nation where the average credit user has more than five credit cards: New Jersey, New York, Connecticut, and Massachusetts. Hawaiians are the only users with an average balance over $6,000. However residents of another twelve states have average debt over $5,000:

  1. New Jersey: $5,767
  2. Connecticut: $5,620
  3. Arkansas: $5,480
  4. New Hampshire: $5,364
  5. Maryland: $5,319
  6. Virginia: $5,311
  7. New York: $5,251
  8. Colorado: $5,217
  9. Illinois: $5,128
  10. Massachusetts: $5,127
  11. Washington: $5,071
  12. California: $5,040

Still, many of the states listed above also have average credit limits over $20,000, New Jersey is the only state over $25,000, but ten other states have over $20,000:

  1. Hawaii: $23,032
  2. Massachusetts: $22,967
  3. New York: $22,921
  4. California: $22,574
  5. Connecticut: $22,108
  6. Illinois: $21,666
  7. Maryland: $21,379
  8. Virginia: $21,252
  9. Colorado: $21,107
  10. Washington: $20,413

So while credit users have more debt in those states, they also have more available credit. As a result, many of these states have low credit utilization ratios. That’s the measure of total debt versus total available credit. Ideally, you should utilize 10 percent of your available credit or less to maximize your credit score, but as you can see from the map no state in the nation is anywhere near than low of a number for utilization.

The conclusion?

Most of us are using too much of our available credit lines without being able to pay off the balances in full every month. That means most American credit users are throwing away significant money on high interest charges.

Finally, while Mississippi leads the nation in the number of users that go over their credit limits, the top five is rounded out thusly:

  1. Mississippi: 19.5%
  2. Arkansas: 16.8%
  3. Kentucky: 16.8%
  4. West Virginia: 16.6%
  5. Alabama: 16.3%

What you can do

There are two things that most American credit users really need to do in the first few months of this year:

  1. Take action to reduce your credit card debt load
  2. Stop charging until you have your credit utilization at ten percent or less

And there are two good reasons you need to take those two steps. First, carrying over credit card balances from month to month means you’re allowing interest charges to be applied to your debt with every billing cycle. In other words, you’re spending more money for those purchases you made and reducing the free cash flow in your budget because that money is being used on finance charges.

Second, credit utilization ratio is the second most important factor in credit score calculation. The more of your available credit that you use, the more of a negative impact it has on your credit score. Using over 50 percent of your available credit means you have a POOR utilization ratio. So that added credit card debt you’re carrying around means a lower credit score, which means you have a harder time qualifying for low interest rates and good terms on loans and new credit cards. So everything from the interest rate on your newest gas credit card to the rate on your next mortgage will be higher because you’re holding onto too much debt.

So how do you eliminate credit card debt quickly?

These four options allow you to reduce debt without causing damage to your credit score if done correctly:

  1. Streamline your budget to free up cash flow, then implement a debt reduction strategy that allows you to pay off your debts in larger chunks in the fastest way possible.
  2. Consider using a 0% APR balance transfer credit card and move your balances to that card so you’re not spending extra money on interest and can reduce the debt quickly – just be wary of high transfer fees.
  3. Take out a personal debt consolidation loan with low APR and use the money to pay off all of your credit cards. Just be sure to pay off the loan before you start charging again or you can make your debt stress worse.
  4. Contact a credit counseling agency to see if you’re eligible to enroll in a debt management program. This consolidates your debts into a single monthly payment and allows the credit counseling agency to negotiate on your behalf to reduce your interest rates.

If you have questions about which of those four options is right for you, call us at to speak with a certified credit counselor for no charge. The counselor will review your debts and budget to help you identify the right path out of debt. You can also get started online with a request for a free debt analysis.

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