The Burden Of Debt

A Snapshot Of The Scope And Impact of Consumer Debt

The big picture is worrisome nationwide, but some areas have bigger payment problems than others

New research from Wallethub reveals just how pervasive debt has become throughout the nation. Visit here.

The personal-finance website WalletHub today released its Q3 2018 Credit Card Debt Study, which found that consumers racked up $16 billion in credit card debt from June through September, sending outstanding debt to an all-time record level for the third quarter of a year. As a result, another Federal Reserve rate hike – which has a 70% chance of happening on Dec. 19 – would now cost credit card users an extra $1.56 billion in interest.

The debt picture is worrisome nationwide, but some areas have bigger payment problems than others according to WalletHub’s report on the Cities with the Most & Least Credit Card Debt entering 2019 (accompanying videos). WalletHub’s researchers 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 more than 2,500 U.S. cities.

A Debt Snapshot

Nationwide, consumers added $16 billion in credit card debt during Q3 2018, pushing total balances to record levels for this time of year. Clearly, this is a ticking time bomb for the country’s economy overall. It’s also a sign of severe financial distress at the local level, multiplied across cities and towns coast to coast.
We’re not equally burdened by this credit card debt crisis. Below, you can see which cities have the most and least work ahead of them.

Cities with the Least Sustainable Credit-Card Debt

  • Colleyville, TX
  • Darien, CT
  • Park City, UT
  • Fairbanks, AK
  • Summit, NJ
  • Leawood, KS
  • The Woodlands, TX
  • Mill Valley, CA
  • Needham, MA
  • Sammamish, WA

Cities with the Most Sustainable Credit-Card Debt

  • Carmel, IN
  • Gainesville, TX
  • Lake Forest, IL
  • Bastrop, LA
  • Allen, TX
  • Madison, MS
  • Coral Gables, FL
  • Frankfort, KY
  • Russellville, AR
  • Southaven, MS

Check out our Credit Card Payoff Calculator here.

Tips For Managing Debt

Make a Budget & Stick to It: It’s difficult to spend within reason or plan savings if you don’t know how your monthly spending compares to your take-home pay, or where that money is going. That is why you should rank-order your expenses – including debt payments, emergency fund contributions and other savings – and trim the fat, if necessary.

Most importantly, once you develop your budget, make sure to stick to it or else you’ll have simply wasted your time.

The Island Approach is a strategy that involves using a collection of credit cards, with each serving a specific purpose. For example, you could transfer your existing debt to a 0% balance transfer credit card to save on finance charges and get out of debt sooner...

Build an Emergency Fund
With a safety net of cash to fall back on, you won’t be as likely to fall behind on your bills in the event of emergency expenses or unplanned joblessness. Your goal should be to gradually save about a year’s worth of after-tax income. In other words, set aside a little bit every month until you’ve got a nice cushion.

Improve Your Credit
This might sound a bit counterintuitive, seeing as more credit could mean more debt. But improving your credit standing will have a dramatic impact on the cost of your debt. And reducing the cost of your debt will allow you to pay it off faster. Better credit can also make it easier to find a job or a place to live, both of which impact your bottom line.You can check your latest credit score for free and get personalized credit-improvement tips on WalletHub.

Try the Island Approach
The Island Approach is a strategy that involves using a collection of credit cards, with each serving a specific purpose. For example, you could transfer your existing debt to a 0% balance transfer credit card to save on finance charges and get out of debt sooner. And you could use a rewards card or two – perhaps one with travel rewards and one with cash back, or maybe a store credit card – for purchases that you’ll be able to pay off by the end of the month.This will enable you to get the best possible collection of terms. It will also tell you when you’re overspending.

Finance charges on your everyday spending cards will signal a need to cut back.

Repay Your Most Expensive Debt First
Most people with serious credit card debt have multiple balances. If that’s the case for you, try the “avalanche method.” That means putting the majority of your monthly debt payment toward the balance with the highest interest rate and making the minimum payment required on the rest. Once your most expensive debt is paid off, repeat the process until you’re debt-free.

Evaluate Your Job Situation
In some cases, all the budgeting and planning in the world won’t be enough to solve your debt problems. You may need to explore whether higher-paying opportunities exist for people with your background or consider acquiring some new skills to make yourself more marketable.This may require a bit of an investment in yourself, but as long as you get a worthwhile return, it’s money well spent.

  • Forest Park Georgia has the lowest median credit card debt, at $917 – 8.7 times lower than Darien, Connecticut, which has the highest median credit card debt ($7,935).
  • Carmel, Indiana has the shortest debt payoff timeline, at 2 months and 1 day – 12.2 times shorter than Colleyville, Texas, whose 24 months and 28 days timeline is the nation’s longest.
  • WalletHub projects that we will end 2018 with $70 billion more in credit card debt than we started with.
  • We began the year owing more than $1 trillion in credit card debt for the first time ever.
  • The best balance transfer credit cards currently offer 0% APRs for the first 15-21 months with no annual fee and balance transfer fees as low as zero. Such deals likely will not be around for too much longer.

Read the entire report, Credit Card Debt Study: Trends & Insights, here.