States with most, least credit card debt

High debt isn't necessarily a sign of financial trouble. Residents in some states with high debt also have relatively high incomes and high credit scores.

By MSN Money Partner Jan 27, 2012 12:06PM

This post comes from Charles B. Stockdale at 24/7 Wall St.

 

24/7 Wall St. on MSN MoneyAmericans cut their credit card debt by 11% last year, compared with 2010, according to a new report by Credit Karma. 24/7 Wall St. looked at the average credit card debt owed by the residents of each state to determine the five states with the most and the least debt as of December 2011.

 

Credit card debt is a measure of the economy, and some analysts suggest that the decrease in the debt is a positive sign. But not all agree. Ken Lin, the CEO of Credit Karma, told CNNMoney that the drop in debt is the result of weak consumer confidence, resulting in slower spending, tighter lending on the part of banks and lower credit limits.

 

One of the driving factors for states whose residents owe the most in credit card debt is that they are wealthy states. Nine out of the 10 states with the most in credit card debt have among the highest median household incomes. Alternatively, six of the 10 states with the smallest amounts of credit card debt have among the lowest median incomes.

 

Other than high median income, many high-debt states also have high costs of living relative to other states. Seven of the 10 with the highest rates of debt are within the 15 states with the highest costs of living. When people must pay more for consumer goods, they often end up with larger amounts of debt. The opposite case is also true. States whose residents pay less for goods have less debt. Four of the 10 states with the lowest amounts of debt are within the 15 states with the lowest costs of living in the country.

Corresponding with wealth, many of the states with high levels of debt have above-average credit scores. In fact, six of the 10 states with the most debt are among the 15 states with the highest average credit scores. Six of the 10 with the least debt are among the 15 states with the lowest credit scores.

 

States with the lowest credit card debt

 

5. Louisiana

  • Average credit card debt: $5,856.
  • Median household income: $42,505, 10th-lowest.
  • Average credit score: 635, third-lowest.
  • Cost of living: 20th-lowest.

Louisiana is a relatively poor state, with the 10th-lowest median household income in the country. The low income keeps spending levels low, too. The average credit card debt among Louisiana residents is the fifth-lowest in the country. This does not prevent state residents from having financial troubles; their average credit score of 635 is the third-worst in the country. Two Louisiana cities, Shreveport and Monroe, were recently included in a list of the largest U.S. cities with the lowest credit scores in the country. Post continues below.

 

4. Utah

  • Average credit card debt: $5,816.
  • Median household income: $54,744, 13th-highest.
  • Average credit score: 673, fifth-highest.
  • Cost of living: fifth-lowest.

Utah is relatively wealthy, with a median household income of nearly $55,000. Despite this, the cost of living in the state is the fifth-lowest in the country. With high incomes and a low cost of living, Utah residents maintain conservative personal debt, illustrated by their fifth-highest average credit score.

 

3. Alabama

  • Average credit card debt: $5,770.
  • Median household income: $40,474, fifth-lowest.
  • Average credit score: 637, fifth-lowest.
  • Cost of living: 12th-lowest.

Alabama is another poor Southern state. The typical household makes approximately $40,500 -- the fifth-lowest median income in the country. A relatively low cost of living may have contributed to Alabamans having one of the lowest levels of credit card debt in the country, but it did not help their credit scores: Alabama has one of the lowest average credit scores in the country. Alabama was named by U.S. News & World Report as one of the most frugal states in the country.

 

2. Mississippi

  • Average credit card debt: $5,276.
  • Median household income: $36,851, the lowest.
  • Average credit score: 652, 18th-highest.
  • Cost of living: 10th-lowest.

Mississippi residents have the second-lowest amount of credit card debt in the country. They also have the lowest median household income, at $36,851. On top of this, the cost of living in the state is the 10th-lowest. Unlike Alabamans, however, Mississippi residents maintain relatively high credit scores -- the state average is the nation’s 18th-highest. Mississippi also was named as one of the most frugal states by U.S. News.

 

1. Wisconsin

  • Average credit card debt: $5,062.
  • Median household income: $49,001, 22nd-highest.
  • Average credit score: 662, 14th-highest.
  • Cost of living: 25th-lowest.

Wisconsin has the lowest average credit card debt in the country. This appears to be the result of frugality. The state has a higher median household income than many other states with low average credit card debt. The low level of credit card debt in the state cannot be simply explained by a low cost of living, as it is not especially low in the state. The fiscal responsibility of Wisconsinites is fairly high, demonstrated by their average credit score, which is the country's 14th-highest.

 

More from 24/7 Wall St.:

States with the highest credit card debt

 

5. Colorado

  • Average credit card debt: $7,533.
  • Median household income: $54,046, 15th-highest.
  • Average credit score: 669, 11th-highest.
  • Cost of living: 19th-highest.

Colorado is not quite as wealthy as the other states with high average credit card debt. But it still has the 15th-highest median household income in the country. The cost of living in the state is comparable to the state’s median income. Despite the high level of debt, residents are generally living within their means, as exemplified by the state’s high average credit score.

 

4. New Jersey

  • Average credit card debt: $7,608.
  • Median household income: $67,681, second-highest.
  • Average credit score: 679, the highest.
  • Cost of living: sixth-highest.

New Jersey has the sixth-highest cost of living in the country. Residents, though, have the money to spend and accumulate debt. With a median household income that is the second-highest in the country, it is not surprising that residents have racked up such a high average credit card debt. Despite the high debt levels, however, personal finances are managed well: The average credit score for New Jersey is the highest among all states.

 

3. Connecticut

  • Average credit card debt: $7,730.
  • Median household income: $64,032, fourth-highest.
  • Average credit score: 672, ninth-highest.
  • Cost of living: fourth-highest.

Connecticut is often recognized as one of the country’s wealthiest states. This is a well-earned reputation. The state has the fourth-highest median household income. The cost of living is also higher than that in all but three states. Residents, therefore, spend more than those in most other states. Average credit card debt is the third-highest in the country, but their credit scores are also high.

 

2. New Hampshire

  • Average credit card debt: $7,748.
  • Median household income: $61,042, seventh-highest.
  • Average credit score: 659, 19th-highest.
  • Cost of living: 10th-highest.

New Hampshire is another New England state with a high median household income and a high cost of living. Its median income is the seventh-highest in the country, and cost of living is the 10th-highest. Residents of the “Live Free or Die” state use this affluence to manage the high costs, racking up the second-highest rate of credit card debt.

 

1. Alaska

  • Average credit card debt: $7,937.
  • Median household income: $64,576, third-highest.
  • Average credit score: 659, 21st-highest.
  • Cost of living: second-highest.

Alaska is the third-wealthiest state in the country by median household income. It is also the second-most-expensive state, due in large part to its distance from the contiguous United States. Residents of the state had nearly $8,000 in average credit card debt as of December 2011. The average credit score in the state is not among the highest, but it is not exceptionally low either.

 

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