The amount of credit card debt carried by the average American is increasing in 2022. Because of the impact of inflation, as well as the lingering effects of the pandemic on people’s financial security, many are using credit cards to make ends meet. Credit cards provide easy finance, but they come at a high cost.
Unfortunately, the interest rates on credit cards are always going to be high. That is the nature of an easy-access unsecured loan. At present, credit card rates are higher than ever, with banks taking advantage of the increased necessity for extra cash.
There are solid ways to decrease your credit card debt and lower the interest rate. These include consolidating or combining the balances of multiple credit cards. We will go into consolidation more deeply below.
Let’s start by examining the average American’s credit card debt, as well as the states where credit card balances exceed the norm.
Average Credit Card Debt in the US
The average American had a credit card balance of $6,194 in 2019. This is a significant amount of money to owe to the bank. It becomes all the more alarming when you consider how much a balance of this amount costs in interest every year.
At an average rate of 16.97% interest a year, the average American will pay $1,051 a year. That amounts to $87.50 a month. Of course, this is assuming that their debt does not grow or decrease. In an ideal world, Americans would be gradually paying off their credit card debt. In 2022, however, the amount of debt is growing and is likely higher than $6,194.
Still, a balance of $6,194 in credit card debt is high. But in the following states, the average debt is significantly higher.
States With Highest Average Credit Card Debt
The following states have the highest average credit card debt in the US:
- Alaska: $8,026
- New Jersey: $7,084
- Connecticut: $7,082
- District of Columbia: $7,077
- Virginia: $6,969
- Maryland: $6,946
- Texas: $6,753
- Hawaii: $6,673
- Georgia: $6,569
- New York: $6,491
Looking at these numbers, you may notice that New York’s average debt is not too high above the national average. This is a sign that the national average is skewed by these ten states. Nonetheless, this does not mean people in other states are not struggling. Income in some of those states is much lower than in a place like New York, making debt less affordable.
Let’s consider the ten states mentioned above. Alaska has the highest credit card debt. This is unsurprising, as the cost of living is high in Alaska. Basic necessities need to come from afar, inflating their price. With the price of gas as high as it is, buying groceries in Alaska is more expensive than ever.
The cost of living is high in each of the other states on this list as well. In Hawaii, people spend a huge proportion of their income on rent or mortgage payments alone. Credit cards are used to buy basics that are now making their budgets moot.
It is interesting that New York is only tenth on the list, as the cost of living is only higher in Hawaii. However, the average income in New York is higher than in most of the country, ensuring that residents have more money to spend.
If you’re struggling with a significant amount of credit card debt which is only getting worse because of interest and rising costs, what can you do about it? One thing to consider is debt consolidation and balance transfers.
Debt Consolidation
Debt consolidation refers to using a loan or credit card to pay off all of your debt. By doing this, you are essentially transferring debt from multiple sources into one lump sum. This can be extremely helpful if you get a better interest rate on your new loan or credit card than you had on some of your old debt.
Balance transfer credit cards are becoming a popular means of debt consolidation. These are credit cards that offer a 0% interest rate for the first year. You can use them to consolidate all your debt and get a head start on paying it off with no interest to consider.
The trouble with balance transfer credit cards is that they have high interest rates once the one-year period is over. For this reason, if you can get a debt consolidation loan with a lower interest rate, that may be the best option, even if there is no interest-free year.
Americans have a significant amount of credit card debt and 2022 is making that worse. Debt consolidation provides one potential way of beginning to dig yourself out of debt.