These are the states with the most and least credit card debt

Credit card debt has soared throughout 2022 as consumers eschew cash to meet inflation.

Data from the Federal Reserve Bank of New York showed a $312 billion increase in total household debt to $16.15 trillion in the second quarter of 2022. Credit card debt, in particular, rose by $46 billion.

According to a study by WalletHub, the average credit card debt by state varies by country. The study used credit and financial data from TransUnion to compile its state rankings based on median debt and average length of time expected to be repaid.

Alaska and the District of Columbia topped the list, with their residents having an average of more than 17 months to pay off their median debts of $3,206 and $2,788, respectively.

Collectively, New York holds the most credit card debt totaling just shy of $50 billion.

West Virginia, Arkansas and Mississippi are at the bottom, with Mississippi having the lowest average credit card debt ($1,806) and the only state with a repayment schedule under 10 months (9 months, 18 days).

“Americans have accumulated a record amount of credit card debt at over $1 trillion,” WalletHub analyst Jill Gonzales told Yahoo Finance. “That said, we’re not all in the same boat — people in some states have less debt than others because of a number of factors.”

Gonzalez attributed these additional variables to the extent to which Americans were affected by the pandemic and their own personal financial skills.

“In states like Mississippi or Arkansas, where the median income and cost of living are among the lowest, the amount of credit card debt is also among the lowest,” Gonzalez said. “At the opposite end, we have Connecticut and Massachusetts, with high levels of income and cost of living and also a large amount of credit card debt.”

A vendor registers a credit card for a customer at a store in Peshawar, Pakistan, April 1, 2019. REUTERS/Fayaz Aziz

A vendor registers a credit card for a customer at a store in Peshawar, Pakistan, April 1, 2019. REUTERS/Fayaz Aziz

Where do credit costs fit in?

US consumers faced record inflation in 2022, which drove up prices of household staples.

This, combined with the knock-on effects of the coronavirus pandemic, has led to a decline in cash payments and an increase in the use of credit cards. Credit card transactions have become more common as consumers leave their homes and continue to travel. Most importantly, they use their credit cards more often to offset inflation in gas and food prices.

However, this has not necessarily led to an increase in credit card debt across the country.

In a separate WalletHub study from June, consumer credit spending for 2022 so far totaled $13.1 billion, a fraction of the debt accumulated in 2021.

A coffee shop displays signs for Visa, MasterCard and Discover, in Washington, DC.  REUTERS/Jonathan Ernst

A coffee shop displays signs for Visa, MasterCard and Discover, in Washington, DC. REUTERS/Jonathan Ernst

“2020 brought record credit card debt reduction,” Gonzalez said. “However, during 2021, consumers added more than $86 billion in new credit card debt back onto their tab, [and] We have yet to measure the impact of inflation on the amount of credit card debt this year.”

According to Bank of America (BAC), credit card delinquencies fell to 1.2% in June 2022, down from pre-pandemic figures (1.96% in July 2019). At the same time, BAC researchers found that credit spending rose 16% year-on-year in June.

Why Credit Card Debt Can Be Good

Financial planners advise credit spenders to follow the basics: Know what you can spend, always be aware of what you owe, and budget accordingly.

Although the idea of ​​going into credit card debt may seem overwhelming, consumers are still encouraged to use credit responsibly. Some debt may be “necessary” for certain costs or experiences that appreciate in value over time.

“Credit card debt is both a wonderful way to pay for things and accrue benefits, and the absolute worst way to pay for things,” said Iona University professor Jeffrey Huber. “I divide credit cards into two groups—those you plan to pay off each month and those where the balance will be paid off over several months.”

April 2, 2022;  Augusta, Georgia;  A patron carries her purchases to the Augusta Women's National Amateur golf tournament.  (Katie Goodale-Augusta Chronicle/USA TODAY Network)

April 2, 2022; Augusta, Georgia; A patron carries her purchases to the Augusta Women’s National Amateur golf tournament. (Katie Goodale-Augusta Chronicle/USA TODAY Network)

Experts recommend using credit cards for purchases that contribute to the card’s rewards program, whether it’s gas, groceries or travel points on airline tickets. They are also a means of maintaining and improving one’s credit rating as long as payments are made on time each month.

“Credit card debt is designed to grow due to high interest rates and through the power of compound [paying interest on interest],” said Nazareth College professor Eileen Beiter.

Beiter described one’s relationship with their finances as “emotional,” which can also be reflected in their spending habits. Impulse buying, for example, often leads consumers to spend more than they have saved, a symptom of the recent fervor for retail shopping.

“The growth of e-commerce is another factor driving credit card debt,” Gonzalez noted.

Luke is a producer for Yahoo Finance. You can follow him on Twitter @theLukeCM.

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