In this piece, we will take a look at the 25 states that are struggling with the most credit card debt. If you want to skip our coverage of how credit card debt really ties in with the stock market and the main economic indicators that investors are currently on the watch out for, then you can skip ahead to the 10 States That Are Struggling The Most With Credit Card Debt.
The consumer spending environment as we head to the second half of the year is quite different from the one in early 2022. Right now, while interest rates are higher, inflation is significantly down from its peak levels. Yet, food inflation is still present, and with higher rates, consumers are feeling the pinch of expensive credit card debt payments. Credit card rates are at historically high levels, so much so that 2024 has set a new peak since the Federal Reserve started its records in 1994.
In fact, and as officials at the Fed are likely to be aware as well, had it not been for a robust market and a remarkably resilient labor market, then rates would have had to drop in order to sustain some spending in the economy. Economic spending and performance sit at the heart of stock market performance as well as politics. In the U.S., 2023 and 2024 have seen some of the most renowned analysts unable to predict that the economy will grow instead of entering into a recession.
Yet, higher rates are a status quo that requires a resilient financial system. As was the case in the U.S. regional banking industry last year, higher rates not only increase delinquencies at the consumer end, but can also make some of the biggest banks feel more vulnerable than their management would prefer.
For consumers, 2023 was a rough year when it came to managing their credit cards. This data is gathered by the Federal Reserve Bank of New York, and recent trends show that credit card debt among U.S. consumers remained the most sensitive to the risk of a debtor heading into serious delinquency. Card rates for these kinds of events are typically higher than other debt like student and car loans, and as of Q4 2023, 6.36% of credit card debt was at risk of being delinquent for more than ninety days. Higher interest rates mean that while credit providers such as and payment providers like JPMorgan Chase & Co. (NYSE:JPM) and American Express Company (NYSE:AXP) are able to bring in more business via interest collection and payment volumes, they also have to deal with a higher risk of consumers being unable to settle their debt.
These two companies have also increased their reserves. For instance, during its Q1 2024 earnings, JPMorgan’s management outlined that its “net reserve build” had grown in the first quarter of 2024, driven by its Card business division. This growth accompanied similar developments reported by Bank of America Corporation (NYSE:BAC) as part of its first quarter of 2024 earnings report. The latest set of results from one of the biggest banks in the United States was not met with pleasure by Wall Street, with the stock tanking by 4.9% after the latest earnings report.
The shares dropped because of Bank of America’s scope, after all, it ranks second in the list of the 25 Largest Banks in the US by Total Deposits. Bank of America’s deposits by September 2023 end stood at $1.8 trillion, needing just 11% growth to catch up with the biggest bank, JPMorgan. These deposits have made it somewhat of a proxy for consumer performance, and at Bank of America Corporation (NYSE:BAC)’s Q1 2024 earnings call, chief financial officer Alastair Borthwick outlined:
Net charge-offs of $1.5 billion increased $306 million from the fourth quarter, driven by continued credit card seasoning and commercial real estate office exposures as swift revaluations from current appraisals and resolutions drove higher charge-offs.
The net charge-off ratio was 58 basis points, a 13 basis point increase from the fourth quarter. . . . . Consumer net charge-offs increased $150 million versus the fourth quarter from the flow-through of higher late stage credit card delinquencies. . . . . [w]e’re encouraged by the trend of delinquencies because the late stage increases slowed and early stage delinquencies improved as well, and that leads us to believe we should begin to see consumer net charge-offs start to level out over the next quarter or so. All of this is still well within our risk appetite and our expectations, and it’s consistent with the normalization of credit we discussed with you in prior calls.
Yet, credit card spending is also growing after being dealt a shock during the coronavirus lock downs of 2020. In Q4 2020, U.S. consumer credit per capita had stood at $2,970 according to the New York Fed. This marked a $1,000 drop over the year ago figures, and the latest data for 2023 shows that the per capita credit card debt in the U.S. sat at $3,950.
So, as credit debt per capita and delinquencies both continue to rise, let’s see which U.S. states are struggling the most with credit card debt.
Our Methodology
To make our list of the U.S. states struggling with the most credit card debt, we used the New York Federal Reserve’s credit card delinquency data for the fourth quarter of 2023.
25 States That Are Struggling The Most With Credit Card Debt
25. Ohio
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.2%
Ohio is a heavily populated Midwestern American state. Its economy is fueled by the manufacturing industry, and the state is home to big ticket names such as Goodyear and Procter & Gamble.
24. Illinois
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.07%
Illinois is another Midwestern state. It ranks high in America for both population and population density. The state is known for its economic hub of Chicago, which is one of the biggest metropolitan areas in the U.S.
23. Tennessee
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.11%
Tennessee is a landlocked Southeastern state. It has one of the lowest median per capita family incomes in America, making it perhaps unsurprising that the state also struggles with credit card debt.
22. Indiana
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.13%
Indiana is the third Midwestern state on our list so far. It also ranks low in median household income but also has a presence of some sizeable entities such as pharma giant Eli Lilly.
21. Rhode Island
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.30%
Rhode Island is one of the smallest states in the U.S., allowing its population of roughly one million to make it a densely populated region. It has a sizeable presence of major players in the finance and healthcare industries.
20. Kentucky
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.52
Kentucky is a Southeastern state. Apart from having a high percentage of credit card delinquencies, its government has also often struggled with taking on too much debt.
19. North Carolina
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.62%
North Carolina is known primarily for its agricultural strengths and vast power generation resources.
18. New Mexico
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.83%
New Mexico is a landlocked Southwestern U.S. state that is the fifth largest in terms of area. It is one of the largest crude oil and natural gas producers in the country.
17. Washington D.C.
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.83%
While not a state, Washington D.C. ranks high on our list of states that are struggling with credit card debt. The city is also known for its high living expenses and child care costs.
16. Alabama
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.86%
Alabama is a Southeastern state with one of the lowest median family incomes in America. It has a highly industrialized economy made of important sectors such as aerospace.
15. Pennsylvania
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.88%
Pennsylvania is one of the most populous and prosperous states in America. It has a $974 billion economy, fueled by manufacturing, agriculture, and other areas.
14. Delaware
Percent of Credit Card Debt Balance 90+ Days Delinquent: 9.88%
Delaware sits at the bottom of the barrel when it comes to area, but is well off in terms of median household income. Some of the largest American banking, healthcare, and chemical companies have a sizeable presence in the state.
13. Arizona
Percent of Credit Card Debt Balance 90+ Days Delinquent: 10.13%
Arizona is a Western state known for its dry climate. However, this hasn’t stopped chip makers such as Intel and TSMC from expanding their presence in the state.
12. California
Percent of Credit Card Debt Balance 90+ Days Delinquent: 10.23%
California sits at the heart of the American and global technology industries. A strong presence of mega technology companies also means that costs of living are higher – making it unsurprising that California ranks high in credit card delinquencies.
11. South Carolina
Percent of Credit Card Debt Balance 90+ Days Delinquent: 10.40%
South Carolina is a Southeastern state. It has one of the biggest highway systems in the country and a robust agricultural economy.
Click to continue reading and see 10 States that Are Struggling the Most with Credit Card Debt.
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Disclosure. None. 25 States That Are Struggling The Most With Credit Card Debt was initially published on Insider Monkey.