Which states have the highest and lowest credit card debt?
Historical inflation has cut into the personal savings rate of households across the country.
In August 2019, the average person saved 7.2 percent of their disposable income. Last June, the rate fell to 5.1 percent shows how the uncertain economic situation, rising prices and stagnating wages are having an impact reduce personal savings.
Lower savings rates make households more vulnerable to financial shocks as inflation is a real disruption to the economy, Many turned to their credit cards.
Highest and lowest credit card debt
The average credit card balance in the US is $5,938 twenty-one states with a higher average.
States with the lowest credit card debt include:
Under consideration of average worker made in July 2022 $3,748it’s easy to see how Credit card debt can get out of hand as soon as the total amount owed is more than what a person earns in just one month. Using the savings rate recorded in June of 5.1 percent, we can calculate an average savings rate for private sector workers of around $191. Debt traps are difficult to escape in the United States because of the extremely high interest rates on a transferable loan that banks are allowed to charge. In some cases, when cardholders see an APR of twenty-four percent, they may just be paying the interest to avoid further increasing the balances they owe.
Looking at the other end of the income spectrum, the need for reform could not be greater.
The states with the largest average amounts were:
Alaska ($8,026) and the District of Colombia ($7,077) also have large credit card balances.
Alaska’s high debt
Alaska has long been at the top of the devastation list.
In 2008, many sounded the alarm when average debt “$3,384 for each borrower – $1,200 more than any other state.“Now that rates are only slightly below those record highs, many believe systemic change is needed to prevent further financial stress.
Leading companies choose to cap interest rates on credit cards and payday loans
According to that New York Federal Reservethe amount of credit card debtholders who have defaulted has increased by 3.05% from Q1 2022 (January-March) to 3.35% in Q2 2022 (May-July). Compared to Q2 2021, Credit card debt increased by thirteen percentthe largest increase over twenty years.
Some lawmakers, such as Senator Bernie Sanders, have proposed legislation that would cap interest rates, or APRs, on credit cards and payday loans fifteen percent. The current highest rate a company can charge is thirty six percent. This industry creates debt traps do not protect borrowers from accumulating debt in excess of what they could reasonably avoid repaying Adding a significant amount of interest to the principle of balance.
Senator Sanders legislation known as Loan Shark Prevention Act would “implement a national usury rate of 15 percent on credit cards and other consumer loans that offers parity with credit union loans.”
Sanders justifies the position by saying that the The people of the nation should be able to get credit at the same rates available to banks that “can borrow from the Federal Reserve for a quarter percent.” The bill was co-sponsored by Rhode Island Senator Sheldon Whitehouse during the previous session of Congress. The bill never made it out of committee.