Credit card debt has always been a difficult hole to crawl out of but, with inflation and the Fed raising rates 10 times since March 2022, many borrowers are feeling particularly slammed — putting day-to-day necessities on credit cards and then getting deeper into debt with higher and higher payments.
"Credit card rates rose more in 2022 than any other year on record," Bankrate Senior Industry Analyst Ted Rossman said in a statement for an annual credit interest report. "Even if rates level off from here, borrowers are facing steep interest charges."
DON'T MISS: What to Do if Your Credit-Card Debt Is Growing
According to the annual report put together by Bankrate subsidiary CreditCards.com, the average credit card now charges a record 20.69% in interest while 35% of Americans carry at least some credit card debt.
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These States Have the Highest (And Lowest) Credit Card Debt Burdens
Out of those, six out of 10 people with credit card debt have been in debt for more than 12 months.
When calculated proportionally to debt and salaries, Mississippi topped the list of states with the highest credit card debt burdens — the average resident with a credit card owes a balance of $4,972 while the average household income is just $68,048.
Assuming (most often mistakenly) that the borrower will pay it off without adding more charges, it will take 22 months of putting 5% of the household income toward the bill to get it to zero. Interest, meanwhile, will clock in at $977.
Oklahoma, Louisiana, New Mexico and Nevada are the states with the highest credit card debt burden while Massachusetts, Washington D.C., Minnesota, New Hampshire and California have the lowest.
With an average annual household income of $124,789, a Massachusetts family will take just 13 months and $656 to get the average $5,633 balance to zero.
When looking at balance independently of income, Alaska and Washington, D.C. owed the most with a respective $6,652 and $6,519 — but while the high salaries paid in the nation capital's placed its residents at the bottom of the list when it comes to debt burden, the $75,923 earned by the average Alaskan household landed the state in the top ten of the most struggling states.
The Danger Of Owing Money
"If you have $6,000 in credit card debt and a $100,000 income, that burden isn't as bad as owing $5,000 when you only make $50,000," Rossman said. "The primary consideration in the ranking is how long it will take you to pay off the debt, with the total interest expense as a tiebreaker."
For those trying to avoid a high-interest debt spiral, Bankrate's experts advise budgeting and saying "no" to nice-to-haves rather than placing them on credit.
If one has already cut back and is left with no choice but pay for essentials with a credit card, one solution can be a 0% balance transfer card — as long as one is not racking up more debt and putting payment off to someone unforeseen later date, they can offer up to 21 months of respite for the borrower to find the money or otherwise catch up.
"It’s important to make debt payoff a priority, perhaps by signing up for a 0% balance transfer card, using a personal loan as a form of debt consolidation, working with a reputable nonprofit credit counseling agency or finding ways to up your income and cut your expenses," Rossman said.
