With Americans having started 2022 off with over $1 trillion in credit card debt, the personal-finance website WalletHub this week released its report on the States with the Highest & Lowest Credit Card Debts. The report drew upon data from TransUnion, the Federal Reserve, the U.S. Census Bureau and WalletHub’s proprietary credit card payoff calculator to determine the cost and time required to repay the median credit card balance in each of the 50 states and the District of Columbia.
Credit Card Debt in California (1st Rank = Least Sustainable):
• Median Credit Card Balance ($2,260)
• Median Income ($54,399)
• Cost of Interest Until Payoff ($201)
• Expected Payoff Timeframe (12 months and 29 days)
Expert Commentary
What daily behaviors lead people to amass credit card debt?
“One is a failure to notice how the debt is piling up, along with a failure to calculate the costs of increasing debt. Another is taking the easy credit offers and becoming dependent on too many credit cards, while letting interest charges accumulate which begin to take a higher and higher proportion of income.”
Rosabeth Moss Kanter – Professor, Harvard Business School; Founding Chair & Director, Harvard University Advanced Leadership Initiative
What are the key situations when going into debt is worth it?
“The only time it is worth it to accumulate revolving debt on a credit card is if it is a true emergency. If you need a critical medication and have to charge it and find a way to pay later, then that’s debt worth accumulating. Or if your car needs necessary repairs and without your car, you will not be able to work then charging the repairs on a card (one hopefully with no or low interest and fees) is unavoidable. Then it is important to pay it off as soon as is reasonable. Accumulating debt in these scenarios is a common occurrence. And, honestly, as an economist who studies debt, I believe credit cards play a valuable role for people to maintain security. For example, if you did not have access to a credit card and that $2,000 car repair was impossible for you to pay then you might lose your job or go to desperate extremes to get the money. Instead, people can charge the expense and formulate a plan going forward to pay it off. This is not a terrible thing.”
Robert Haywood Scott III, Ph.D. – Professor, Monmouth University
What are three easy steps a person should take in order to become debt-free?
“If you are already in credit card debt you need to develop a plan to pay off the balances. First, try to stop spending. Then figure out what the most you could pay monthly toward reducing the credit card debt and set that amount up as a monthly recurring automatic payment (make sure it is above the minimum payment). Whenever you get extra funds that can be used toward reducing your credit card debt make a payment – you do not have to wait until the monthly billing cycle. Online payments will be posted before mailed-in payments, and you will not have to worry about keeping funds available for when the check clears.”
Jeffry Haber, Ph.D., CPA – Professor, Iona College
