Research of the Week: Who Has the Worst Average Credit Card Debt in America?

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

The interesting study

WalletHub conducted a study about the average credit card debt in America and which cities have the worst debt. Using credit data from TransUnion, they looked at over 2,500 cities and considered the median credit card debt, the cost to pay it off, and the months and days it would take to pay the debt off. This data allowed WalletHub to arrange cities based on the big picture of their debt burden.

The big result

These 5 cities are in the highest percentile for debt burden (starting with the worst):

  1. Colleyville, TX
    1. Median credit card debt: $5,593
    2. Cost to pay off: $880
    3. Months & days until payoff: 24 months, 28 days
  2. Darien, CT
    1. Median credit card debt: $7,935
    2. Cost to pay off: $1,167
    3. Months & days until payoff: 23 months, 8 days
  3. Park City, UT
    1. Median credit card debt: $5,376
    2. Cost to pay off: $720
    3. Months & days until payoff: 21 months, 5 days
  4. Fairbanks, AK
    1. Median credit card debt: $4,655
    2. Cost to pay off: $620
    3. Months & days until payoff: 21 months, 2 days
  5. Summit, NJ
    1. Median credit card debt: $4,953
    2. Cost to pay off: $655
    3. Months & days until payoff: 20 months, 29 days

And these 5 cities are in the lowest percentile for debt burden (starting with the best):

  1. Carmel, IN
    1. Median credit card debt: $3,646
    2. Cost to pay off: $64
    3. Months & days until payoff: 2 months, 1 day
  2. Gainesville, TX
    1. Median credit card debt: $2,428
    2. Cost to pay off: $45
    3. Months & days until payoff: 2 months, 14 days
  3. Lake Forest, IL
    1. Median credit card debt: $6,030
    2. Cost to pay off: $113
    3. Months & days until payoff: 2 months, 16 days
  4. Bastrop, LA
    1. Median credit card debt: $1,647
    2. Cost to pay off: $41
    3. >Months & days until payoff: 3 months,11 days
  5. Allen, TX
    1. Median credit card debt: $3,780
    2. Cost to pay off: $95
    3. Months & days until payoff: 3 months, 16 days

The fascinating details

This graphic shows the cities in WalletHub’s study of the average credit card debt in America and their corresponding percentile:

average credit card debt in america

What you can do

“People need to be more aware of how much debt they carry relative to their income,” explains Gary Herman, President of Consolidated Credit. “If you make less, it means you have less breathing room to run up debt. Checking your credit card debt ratio is a good way to make sure you’re not overextended.”

Credit card debt ratio measures how much revolving debt you have relative to your income. It compares the total minimum payment requirements on your credit cards to your total monthly income. Ideally, your ratio should never exceed more than 10%. So, if you make $3,000 per month, your total credit card payment requirements should never exceed $300.

“Checking your credit card debt ratio gives you an easy way to see where you’re overextended with credit card debt,” Herman continues. “People with the highest credit card debt burdens tend to have lower credit scores and more problems with late payments. Knowing your ratio can give you the early warning sign you need to find solutions before debt becomes a real problem.”

Herman also argues that carrying balances over month-to-month costs households more than they think. He recommends people who can’t pay off their balances in full every month need to take the following steps:

  1. Make a budget that cuts back discretionary expenses (wants) as much as possible.
  2. This allows you to maximize cash flow to repay credit card debt faster.
  3. Total up your balances to see how much you owe.
  4. If you owe less than $5,000, implement a debt reduction plan. Start by paying off the highest APR balance first to save money on interest charges.
  5. If you owe more than $5,000, explore options for debt consolidation. If you have good credit, you can consolidate on your own. For card users with less-than-perfect credit, you may need professional assistance through a debt management program.

“Carrying big balances also isn’t helping consumers’ credit scores,” Herman explains. “If you’re using more than thirty percent of your total available credit limit, having that much debt is hurting your credit score. Ideally, you want to use less than 10 percent of your available limit.”

By eliminating debt and keeping balances low, you boost your credit score and have an easier time maintaining a low debt-to-income ratio. This makes it easier to qualify for good interest rates and better terms on loans and new credit cards. If you’re working to achieve homeownership, having no credit card debt to repay means you have more money to save for a down payment.

“You’re not doing yourself any favors by running up your balances,” Herman concludes, “Adjust your budget, focus on debt repayment and get your balances back to a manageable level. If you can’t get there quickly on your own, reach out to get professional help.”

Press Inquiries

April Lewis-Parks
Director of Education and Public Relations

AParks@consolidatedcredit.org
1-800-728-3632 x 9344