What states have the highest and lowest credit card debt?

Historic inflation has cut into the personal savings rate of households across the country.

In August 2019, the average person was saving 7.2 percent of their disposable income. This past June, the rate fell to 5.1 percent showing how the uncertain economic situation, rising prices, and stagnant wages impacted are driving down personal savings.

Lower savings rates leave households more vulnerable to financial shocks, with inflation constituting a real disruption to the economy, many turned to their credit cards.

Highest and lowest amounts of credit card debt

The average credit card balence in the US is $5,938, with twenty-one states having a higher average.

States with the lowest levels of credit card debt include:

Considering the average worker in July 2022 made $3,748, it is easy to see how credit card debt can get out of control once the total amount owed is more than what a person makes in just one month. Taking the 5.1 percent savings rate recorded in June, we can calculate an average savings rate for private sector workers of that around $191. Debt traps can be tough to escape in the United States because of the extremely high interest rates on a carried balance that banks are allowed to charge. In some cases, when cardholders see an APR of twenty-four percent, they may just pay the interest to not prevent further increases to the balances they owe.

When looking at the other end of the income spectrum, the need for reform could not be more office.

The states with the largest average amounts were:

Alaska ($8,026) and the District of Colombia ($7,077) also happen to have large credit card balences.

Alaska’s high levels of debt

Alaska has long stood at the top of the devestating list.

In 2008 many were ringing the alarm when average debt levels were “$3,384 for each borrower - $1,200 more than any other state.” Now, with rates only slightly down from these record highs, many believe that a systemic change is needed to prevent further financial stress.

Leaders move to cap credit card and pay-day loan interest rates

According to the New York Federal Reserve, the amount of credit card debt holders that became delinquent in has increased from 3.05% from Q1 2022 (January-March) to 3.35% in Q2 2022 (May-July). Compared with Q2 2021, the amount of credit card owed increased thirteen percent, the largest increase over twenty years.

Some lawmakers like Senator Bernie Sanders have proposed legislation that would cap interest rates, or APRs, for credit cards and payday loans at fifteen percent. The current highest rate a company can charge is thirty-six percent. This industry creates debt traps that do not protect borrowers from accumulating debt beyond what they could reasonably pay back without adding a significant amount in interest to the principle balance.

Sen. Sanders’ legislation known as the Loan Shark Prevention Act would “establish a national usury rate of 15 percent on credit cards and other consumer loans, providing parity with credit union loans.”

Sanders justifies the position by arguing that the nation’s people should be able to obtain credit at the same rates available to banks that “can borrow from the Federal Reserve for a quarter of a percent.” The legislation was co-sponsored during the previous congressional session by Rhode Island Senator Sheldon Whitehouse. The bill never made it out of committee.