Research of the Week: Which Cities Have the Biggest Credit Card Debt Problems?

Credit card debt is increasing nationwide, but it’s getting worse faster in three metropolitan areas.

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

The interesting study

The credit card comparison site CompareCards powered by LendingTree conducted a nationwide study of credit card balance increases in 2018. They looked at the Top 30 metropolitan areas in the U.S. to see if credit card debt problems were getting worse faster in certain places.

The big result

These five cities have the fastest growing credit card balances in the country:

  1. Miami, FL – balances up by 8.6% in 2018
  2. Pittsburgh, PA – balances up by 5.9%
  3. New York, NY – balances up by 5.3%
  4. Chicago, IL – balances up by 5.2%
  5. San Antonio, TX – balances up by 4.8%

On the other end of the spectrum, average balances in these five cities are actually decreasing instead of increasing:

  1. San Francisco, CA – balances down 6.4%
  2. Dallas, TX – balances down by 4.8%
  3. Baltimore, MD – balances down by 4.5%
  4. Charlotte, NC – balances down by 2.2%
  5. Atlanta, GA – balances down by 2.1%

The fascinating details

Out of the 30 metropolitan areas that CompareCards checked, only one third showed balances decreasing since the start of 2018.

However, just because balances are increasing faster in some cities, it doesn’t mean that everyone else is financially stable. In fact, even with the 8.6% increase in Miami, card users there don’t have the highest average balances. Balances are highest in Washington D.C., where the average balance is $7,276.

And although San Francisco, Baltimore and Dallas are the top three on the balance-decrease list, they actually have higher average balances than Miami. Miami card users have an average balance of $5,639.34, while Baltimore card users carry average balances of $6,406.55, Dallas users sit at $5,934.40 and San Francisco cardholders carry $6,587.19.

What you can do

“Most Americans that use credit cards simply have too much debt right now,” says Gary Herman, President of Consolidated Credit. “The only encouraging thing out of this study is that at least some high-balance cardholders are making concerted efforts to reduce debt. But more people need to do the same. Most Americans need to re-balance their budgets so they can stop charging and focus on paying off debt.”

Herman argues that carrying balances over month-to-month is costing 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 ten percent of your total available credit limit, having that much debt is hurting your credit score.”

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.”

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