Alaska Tops List of 2016 Heaviest Credit Card Debt Loads
Dec 22nd, 2016 @ 1:32 PM by Amber Nelson
“The variability between the best and the worst state is high” when it comes to handling debt, said John Pelletier, director of the Center for Financial Literacy at Champlain College in Burlington, Vermont. The rankings were based on a combination of the average credit card balance and the state’s median earnings. CreditCards.com then calculated how long it would take the median resident to pay off the average debt using 15 percent of his or her monthly income. Based on those methods, Alaskan residents were in the worst position debt-wise with an average of 20 months to pay off their debts with $992 in interest.
The rest of the top five included New Mexico, also with 20 months but paying $743 in interest, George with 18 months and $716, Texas with 18 months and $712 in interest and Florida with 18 months and $678 in interest. Among those states at the top of the list, Texas residents were doing the worst with keeping up on their payments. Forty-four percent of all credit card accounts in the state were behind by 90 days or more.
On the other end. North Dakota residents would need just 12 months to pay off the average credit card balance with 15 percent of their incomes and it would take $370 in interest. Next was Iowa with 13 months and $370 in interest. They were followed by Minnesota with 13 months and $458 in interest, Massachusetts with 13 months and $482 in interest and Wisconsin with 14 months and $421 in interest.
So what separates the top states from the bottom? Among the biggest reasons is how the local economy is performing. In November 2016 Alaska had the highest unemployment rate, at 6.8 percent, as the energy development industry has dramatically slowed this year. Compare that to an unemployment rate of just 2.9 percent in North Dakota and it is easier to see why residents in states with faltering economies rely more on their credit cards when their source of income becomes unreliable.
The burden of credit card debt could become even more heavy in the coming year as interest rates have already started to climb and are expected to continue rising.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.