2017's Cities with the Highest & Lowest Credit Card Debts
Financial resolutions are among the most popular New Year’s vows for Americans. But as 2017 unfolds, some consumers will find it more difficult than others to stick to theirs. Americans, after all, are projected to have racked up an additional $80 billion of credit-card debt at the end of 2016, putting outstanding balances dangerously close to record levels seen during the Great Recession.
But just as worrying as our debt is consumers’ denial or lack of awareness about what they really owe. In 2015, the Federal Reserve Bank of New York reported that the total amount of credit-card debt U.S. consumers claimed to have was 37 percent lower than the figure lenders reported.
Without an accurate knowledge of our balances, it’s impossible to create a realistic credit-card payoff plan. In addition, location plays a central role in how well consumers manage their credit-card debts — and how much they increase — depending on factors such as income and financial literacy. Drawing on TransUnion credit data, WalletHub’s analysts calculated the number of months required to pay off the average credit-card balances in 2,537 U.S. cities as well as the associated costs of doing so. Continue reading below for our findings, a full description of our methodology and expert insight.
Cities with the Highest & Lowest Credit Card Debts
|Percentile Rank*||City||Avg. Credit-Card Debt||Cost to Pay off||Payoff Months|
Ask the Experts
With projections for credit-card debt in 2016 near unsustainable levels not seen since the Great Recession, we asked a panel of credit experts to shed light on the irresponsible credit behavior that leads to such negative results and the effects of such mistakes on the overall economy. Click on the experts’ profiles to read their bios and thoughts on the following key questions:
What daily behaviors lead people to amass credit-card debt?
What is the biggest mistake people make when managing credit-card debt?
How does the growth of credit-card debt affect the economy?
What role, if any, should government play in incentivizing and encouraging people to maintain low debt-to-income ratios (e.g., through tax incentives)?
In order to identify the cities with the most and least sustainable credit-card debts, we first looked at the average credit-card balances of residents in each of 2,537 U.S. cities as of October 2016, based on TransUnion data. Our analysis includes credit cards that carried a balance and excludes store cards. For our sample, we considered only the city proper in each case and excluded cities in the surrounding metro area.
Using WalletHub’s credit card payoff calculator and the average credit-card balance and income of residents in each city, we determined the required number of months to pay off that balance and the resulting finance charges. In order to do so, we made the following two assumptions:
First, we assumed that individuals earning the national median income ($30,926) would be able to pay 3 percent of their initial credit-card balance every month. Based on that assumption, we calculated the percentage that the minimum credit-card payment (i.e. 3 percent of the balance) represents of the median income. We then used that percentage and the median income in each city to calculate the average monthly payment in a particular city.
The median income for each city is based on the 2015 earnings of individuals aged 16 and older who had full- or part-time employment, according to the U.S. Census Bureau's American Community Survey. The figure excludes income from sources other than work.
Second, we assumed a 14 percent average interest rate based on the APR paid by existing cardholders, according to the average interest rate assessed on accounts with finance charges, as provided by the Federal Reserve's Consumer Credit report. We used that percentage to compute the cost of paying off a city’s credit-card balance.
Finally, we ranked the cities based on the calculator’s outputs for each city. A percentile rank of “99” corresponds with the city with the least sustainable credit-card debt — that is, the city with the longest payoff timeline and largest payoff cost.
Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Federal Reserve and TransUnion
Credit Card Payoff Calculator
WalletHub's unique & free credit card calculator helps you take the guesswork out of credit card use. Determine your optimal credit card debt payoff plan and monthly payments by fully understanding the total cost involved and the amount of time it will take to become debt free. At the same, we will scan more than 1,000 credit card offers in real-time and let you know if any of them would provide you significant savings.