American households are falling deeper into debt, reaching another all-time high last year of more than $1 trillion in outstanding revolving credit — also known as credit-card debt. That’s a 6% jump from the year before and a 20% increase since 2013.
On Tuesday, the Federal Reserve Bank of New York released data showing that total household debt increased by 1.5% to $13.15 trillion in the fourth quarter of 2017, making the fifth consecutive year of annual household debt growth. There were increases in mortgage, student, auto, and credit-card debt.
But not everyone shares the same burden.
Over the past five years, 40 states have seen an increase in credit-card debt, according to data from financial research company ValuePenguin. The card balances in Alaska reached a whopping $13,048 per capita in 2018, 2.4 times as much as that in Ohio, where the lowest average balance was observed.
The rise was significantly larger in Republican states that voted for Donald Trump in the 2016 presidential election than those that voted for his Democratic rival Hillary Clinton — 24% versus 4%, respectively. Some of the red states, such as Wyoming, Alaska and Montana, saw their average card balances jump by more than 60% since 2013.
On the other hand, eight out of the 10 states with decreased balances are blue states. The average credit-card debt in Maine, Hawaii and Rhode Island, dropped over 10% since 2013.
Of course, this is not to say that someone’s political standing contributes in any direct way to their debt behavior. Economic conditions in different states, such as median household income and amount of household savings, are certainly factors.
One reason for the continuously increasing credit-card debt is the fact that more consumers are using credit cards. Data from credit reporting company TransUnion last year suggested that more than 171 million consumers had access to credit cards backed by major banks and open network card issuers in the first quarter of 2017, the highest number since 2005.
“Banks are offering reward programs and low-interest promotions that make credit cards an extremely enticing product to use,” said Robert Harrow, ValuePenguin’s head of credit research, “Consumers are favoring credit payments more and more.” As such, credit cards are increasingly getting people into trouble whether it’s investing in stocks or online gambling.
Credit-card debt per capita in 50 states
|State||Voted for||2013||2018||Percentage change|
However, not everyone uses credit cards for their rewards. Nearly half of Americans cannot afford a $400 emergency charge and have to turn to credit to cover basic necessities. According to Harrow, this is likely what causes such discrepancies state-to-state.
The strong economy has boosted consumer confidence and spending over the past few years. The impact of the recent stock market volatility on consumer debt is still unclear.
“The last recession showed us that consumers were more willing to default on their mortgages than credit cards,” Harrow said. “As debt continues to increase, we’ll need to track credit-card delinquencies to see if they too reach critical levels.”
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