More Americans are living comfortably, but the increased prosperity isn’t exactly equal.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

In 2013 the Federal Reserve started an annual Survey of Household Economics and Decisionmaking (SHED). The survey attempts to find out how average American families are faring when it comes to their finances. Now in its fifth year, the 2017 survey findings show improve financial well-being for many Americans… but not all of them.

The big result

One of the big questions on the survey asks families to rate their own financial well-being. Financial well-being is defined by the CFPB as:

“A state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.”

It includes 4 elements:

1. The ability to manage your money and control your finances day-to-day
2. The capacity to absorb a financial shock
3. Being on track to meet your financial goals
4. Having the financial freedom to make choices that improve your quality of life

According to the latest survey 74% of adults said they were doing okay or living comfortably in 2017. That’s 10 percentage points higher than when the original survey was taken in 2013.

The fascinating details

If you just look at that one headline statistic, it would seem like nearly one in four Americans are doing well. That would indicate, for the most part, the American consumers are enjoying full economic recovery after the Great Recession.

But if that many Americans are doing alright, why are there so many reports of American families still struggling? The answer: Financial well-being is not equal across all demographics and geographic regions. The likelihood that you feel like you’re doing okay depends on who you are and where you live.

• More people across all education levels report that they are doing okay. But those with a Bachelor’s degree or higher have an 85% chance of being secure, while those with a high school diploma or less only have a 66% chance.
• Over one in four whites feel they are financially secure versus less than two thirds of both blacks and Hispanics.
• Living in an urban area also means you are more likely to feel the financial well-being. Three in five urban Americans are good or excellent, versus two in five rural Americans.
• If you’re married with no kids, you’re the most likely to feel secure at 84%, compared to married with kids at 76%. If you’re unmarried with kids, you’re the least likely to feel secure at 57%

The survey also asked a new question related to financial well-being this year. They asked people if they personally knew anyone addicted to opioids. One fifth of all adults (and one quarter of whites) personally knew someone impacted by the opioid crisis. And those who do are less likely to be financially secure.

What you can do

“The good news in this report is that overall, Americans are doing better and becoming more financially secure,” says Gary Herman, President of Consolidated Credit. “Even if you fall into a group that shows lower financial well-being than other groups, the number of people who are living comfortably in your demographic is on the rise. That’s a good sign, but we need to do more to help those who are still feeling less secure.”

Herman says the solution is often improved financial education. The more people understand the basics of managing money, building credit and avoiding debt, the more likely they are to be able to achieve stability.

“An individual’s chances for living comfortably are greatly increased when they have the right knowledge to overcome financial challenges,” Herman explains. “The focus needs to be on providing financial education to low-income communities. Financial education still isn’t a part of most public-school curriculums. As a result, most kids learn finance from their parents. Parents who are struggling to make ends meet, particularly in a single-parent household, don’t have the time or resources to teach their children good financial habits. As a result, financial well-being isn’t a skill set that gets passed down from one generation to the next. Programs need to be provided that intervene to provide the right resources, so we can break the cycle.”

Consolidated Credit works with and supports organizations like the United Way and Junior Achievement in order to get financial education to the audiences that need it most. These community outreach initiatives are designed to help groups that are the most at risk of financial insecurity.

“If you’re struggling to live comfortably, seek out free programs in your community that can help you learn how to achieve stability,” Herman encourages. “And if you’re a parent, find programs through organizations like Junior Achievement that can give your children the head start they need to be successful.”

The post Are You Feeling the Financial Well-Being? appeared first on Consolidated Credit.

The saving rate hit 6.8 this summer, but many Americans still aren’t saving.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

This week the Wall Street Journal reported that the Bureau of Economic Analysis revised their personal saving rate for U.S. consumers. A personal saving rate is a measure of how much American households save. It compares household monthly savings amounts to disposable income (income after taxes).

The big result

The personal saving rate for the first quarter of this year more than doubled from the previous estimate. The Bureau of Economic Analysis previously pegged American savings at 3.3%. But they revised that number up to 7.2%.

This is significant because it would mean that average Americans are on target with their savings instead of being behind. Most experts recommend that households should save 5-10% of their disposable income each month. At an average rate of 3.3%, it would mean that most Americans weren’t saving enough. But the new estimate of 7.2% would put most families on target with where they need to be.

The fascinating details

The confusing thing about this revision is that most of the reports about savings in 2018 have been pretty bleak. For instance, Bankrate.com polled U.S. adults in June to ask about emergency savings. Only 29% of those surveyed had emergency savings to cover six months or more of budgeted expenses. In addition, 55% had less than three months saved and almost one in four (23%) had nothing.

• 29% had 6+ months in emergency savings
• 18% had 3-5 months
• 22% had fewer than 3 months
• 23% had none

Oddly though, the same Bankrate survey found that the majority of consumers were at least somewhat comfortable with their savings.

• 24% were very comfortable
• 37% were somewhat comfortable
• 14% were not too comfortable
• 22% were not at all comfortable

But, when you compare those two groups of statistics, you see a big problem. If 23% of Americans have no emergency savings and only 22% are not at all comfortable with their savings, it means that 1% of people surveyed are fine having no financial safety net.

What’s more, this all begs the question of who exactly is saving so much money. If the average personal saving rate is 7.2%, then you would think that more Americans would have a big financial cushion to fall back on. Experts recommend that you should have at least 3-6 months of budgeted expenses saved. If we’re all saving 7.2% of our disposable income each month, then you’d think that the people surveyed by Bankrate would be in a much better position.

“Average rates in finance often don’t present an accurate picture for average Americans,” says Gary Herman, President of Consolidated Credit. “People in high-income brackets that invest a large portion of their income skew results like personal saving rates. So, while the upper 5-10% may be saving more, most Americans may still be struggling to save anything at all.”

What you can do to increase your personal savings rate

“No matter how much you earn, you should always aim to save about five to ten percent of what you take home,” Herman explains. “But when people hear that number, they often get discouraged. If you can’t save five percent, you may feel defeated and just decide to ignore savings altogether. You just leave it for whatever you have left at the end of the month. But this usually means that you end up saving nothing at all.”

Herman says the important thing is to start saving, even if you have to start small.

1. Review your budget to cut back expenses as much as possible.
2. Divert any funds you free up into savings.
3. Make savings a line item in your budget, like a bill you pay yourself each month.
4. If possible, set up a recurring transfer from your checking to savings account at a time when it won’t overdraft your account.
5. This makes savings automatic, so you don’t have to think about saving money.

“Even if you can only save 1% of what you take home, that gets you started,” Herman encourages. “Then you can gradually increase the amount you save as you work to improve your financial situation.”

For debt management program clients:

Completing your debt management program will free up the money you use to cover the payment. Directly after you complete the program, we recommend turning the money you were using for your DMP payment into your recurring monthly savings payment. Doing so as soon as possible helps you avoid a situation where you’ve already started to use that money to cover other things. This can provide a big boost to your savings and ensure you stay on the right financial track after you graduate!

For people still struggling to find a solution for their debt:

Credit card debt has a way of eating up your income and leaving you with nothing extra to save. In many cases, if you can find a more efficient way to pay off your debt, it can free up funds that you can use for other essentials, like savings. For example, people who qualify for a debt management program reduce their total credit card payments by up to 30-50%. Reducing your payments can free up money so you can balance your budget and start working to achieve real financial stability.

The post What’s Your Personal Saving Rate? appeared first on Consolidated Credit.

Whether it’s from forgetfulness or sheer lack of funds missed credit card payments can affect your finances more than you may think.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting studies

Two surveys came out recently that investigate how likely credit card users are to miss a payment. The first survey from NerdWallet polled 2,000 people to find out how many had made a delinquent payment. The second survey from CreditCards.com polled 1,000 adults to ask the same type of question.

The big result

In NerdWallet’s survey, nearly one in four respondents (22.4%) admitted that they had missed a payment by more than 30 days. CreditCards.com founds that 42% of cardholders they polled had missed at least one payment.

That’s concerning because climbing delinquency rates could spell trouble for the economy. Credit card delinquency rates from missed payments hit an all-time high of 6.7% in 2009 at the height of the Great Recession. Then the national delinquency rate fell to its lowest point in 2015 at 2.12%. But now it’s climbing again as more cardholders miss payments.

What’s more, that national rate from the federal reserve can be deceiving. It looks at all the population, and not just credit card users. If you only look at credit cardholders, delinquency rates are higher. In Nevada, for instance, one in ten cardholders has at least some missed payments.

The fascinating details

The CreditCards.com survey explored who was most likely to miss a payment.

• Women were more likely to miss a payment than men (48% vs 35%)
• Oddly, employed cardholders were more likely to miss payments than unemployed cardholders (46% vs 34%)

But beyond the demographics, what’s even more concerning were the reasons why payments were missed. Both surveys explored why cardholders hadn’t made their payment. And the responses were slightly shocking:

• On CreditCards.com:
  • 60% forgot they needed to make a payment
  • 35% didn’t have enough funds to make the payment
  • 13% were too busy to pay
  • 11% were traveling
• On NerdWallet:
  • 35% forgot to pay
  • 33% used the funds to cover other essentials
  • 32% had an unexpected emergency

What you can do

“What concerns me is the number of people who say they’ve missed payments because they forgot or were too busy,” says Gary Herman, President of Consolidated Credit. “Missed payments can have a significant impact on your credit score. And even aside from that, late fees can stack up quickly. You’re not doing yourself any favors by missing payments. It’s unfortunate if someone is forced to miss a payment due to their financial circumstances. But missing payments for any other reason is just irresponsible, especially given all the tools that are available that can help you pay on time.”

Defining delinquent payments

A missed payment – also known as a delinquent payment – is any payment missed by more than 30 days. If you make the payment prior to 30 days from the original due date, the payment is late, but not missed.

The effects of late and missed payments

Creditors report missed payments to the credit bureaus. That means that the delinquency appears in the payment history of your account. Credit history accounts for 35% of credit score calculations – it’s the single biggest factor in determining your credit score. Just one missed payment can drop your score by as much as 90 to 110 points, according to Equifax.

But even before a payment is officially missed, the financial consequences of not paying on time can be steep. The maximum fee for a late payment is $27 – but that cap only applies if you’re a first-time offender. Otherwise, late fees can be higher.

“A late payment costs money upfront,” Herman explains, “But once the payment is fully delinquent by 30 days or more, the cost is even higher. A 90-point drop in your credit score will significantly damage your borrowing power. Every loan and credit card you get afterward will have higher interest rates. That means higher monthly payments and more interest charges to pay each month. A missed payment can start a slow spiral into financial hardship.”

Keep in mind that the impact of missed payments increases with each month that passes. Creditors report missed payments at 30, 60, 90, 120, 150 and 180 days. So, the damage to your score increases with each month that passes. After 60 days of nonpayment, most creditors also apply penalty APR, which can be double your normal interest rate. Once penalty APR applies, you must make six consecutive payments on time before the creditor will restore the original rate.

If the payment is more than six months late, the creditor charges off the account and sends it to collections.

Tips for avoiding missed payments

“For anyone that’s missing payments because you’re forgetful, busy or traveling, AutoPay or Direct Debit are the tools for you,” Herman says. “You can set up AutoPay through your credit card account. Or you can set up a recurring Direct Debit ACH payment through your checking account. Both of these options will help ensure you never miss another payment.”

AutoPay and Direct Debit are slightly different tools, although they both accomplish the same thing:

• With AutoPay set up through the account, you can choose how you want to pay every month. You can usually set it to make the minimum payment, to pay the balance off in full or to pay an amount you set. Ideally, paying off the balance in full every month is the best option, because it allows you to use a credit card account interest-free.
• Setting up recurring payments using Direct Debit through your bank account usually works best if you’re already carrying a balance. You can set a fixed amount each month so you can pay down your balance faster with the biggest payments you can afford. Otherwise, using Direct Debit means you must remember to make the payment since credit card payments can change every month.

“You can also set up bill payment reminders, either through your credit card account or through any budgeting tool that comes with a bill pay calendar,” Herman continues. “Budgeting tools like Mint sync with your credit card accounts and send bill pay reminders automatically. This can help you avoid missing a payment because you’ve been too busy.”

What do to if you don’t have the funds

“Missed payments due to lack of funds or unexpected expenses are a different matter,” Herman says. “In this case, tools like AutoPay and recurring Direct Debit payments can hurt instead of help. If you don’t have the funds in your account, you can incur NSF (non-sufficient funds) fees, in addition to late fees. Instead, you need to find a solution that can provide debt relief, so you can balance your budget and start to get ahead.”

Herman says that the first step when you’re struggling to make your payments should be to call your creditors.

“Don’t treat your creditors like collectors if you’re having trouble,” he explains. “If you call them before you start to fall behind, they’re often willing to work with you. They may even help you sent up a payment plan you can afford or pause your payments until your situation improves. Credit card companies don’t want your accounts to become delinquent, because that’s not good for their bottom line either. So, it’s often worth the call to see if they’re willing to work with you to make arrangements.”

If your creditors won’t play ball, then it’s time to call a credit counselor. A certified consumer credit counselor can help you explore options for debt relief, such as debt consolidation. If you can’t qualify for do-it-yourself options because you don’t have the best credit score, then the counselor may recommend a debt management program.

“What people often don’t realize is that many of these debt relief solutions can actually help you balance your budget, too,” Herman encourages. “Because these solutions usually focus on paying off debt at the lowest interest rate possible, it makes repayment more efficient. You lower the rates applied to your debts, you can get out of debt faster, even though you may pay less each month.”

The post Understanding the Effects of Missed Payments appeared first on Consolidated Credit.

Americans paid off $40.6 billion of credit card debt, then added $30 billion back.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting studies

The debt experts at WalletHub track trends in consumer credit card debt. Each quarter they update their statistics to see how consumers have managed debt over the last three months. This week, they released the update for the second quarter of 2018 (April-June).

The big result

In the first three months of 2018, Americans paid off $40.6 billion in credit card debt. It’s the second biggest repayment period since tracking started in 1986. But in the next three months of the year, Americans piled almost $30 billion of credit card debt back on.

As you can see from the chart, credit card debt repayment has become equivalent to a yo-yo diet for many Americans. We pack on the debt one quarter, then feel guilty so we cut back the quarter. But once the balances are down, we start spending again and bounce right back up.

“Just like yo-yo diets aren’t good for your physical health, yo-yo credit card debt repayment isn’t good for your financial health,” explains Gary Herman, President of Consolidated Credit. “It’s hard on your budget, it can be bad for your credit score, and it certainly must increase people’s financial stress.”

The fascinating details

At the start of the Great Recession, Americans carried $56.2 billion of credit card debt. We ended 2017 at $91.8 billion. That means U.S. consumers currently have 104% more credit card debt than we did when the economy tanked.

Average debt per household is also back to pre-recession levels. The average American household currently owes $8,322. That’s just $129 below the amount the WalletHub has dubbed “unsustainable.”

“With average household debt so high, it means more and more households are headed for financial distress,” Herman says. “You reach a point where credit card debt payments use up so much income that you don’t have anything left. You start to juggle bills and put off necessary expenses because you just don’t have enough income. And if you’re on a yo-yo diet of debt repayment, the situation is probably getting slowly worse and worse over time.”

What you can do

“The challenge that many people face is that they’ve become dependent on their credit cards,” Herman explains. “You don’t have a balanced budget that builds in savings so you can maintain an emergency savings fund. As a result, you use credit to cover emergencies, repairs, medical bills and even daily expenses because you don’t have enough income. Although you may be able to stop spending for a month or two, unexpected expenses inevitably crop up and lead to new charges. It’s a vicious cycle.”

In order to break that cycle, many people need a way to force themselves to break their credit habit. That’s where solutions like a debt management program can be useful.

1. You enroll in the program to pay off credit card debt at significantly reduced interest rates.
2. In exchange for reducing your rates, your creditors freeze your accounts. That means you can’t keep spending.
3. A credit counselor helps you create a balanced budget that doesn’t rely on credit cards to get by.

“Although it can be a tough adjustment to start living credit-free, it’s worth it,” Herman says. “And this can be more effective than do-it-yourself debt relief solutions, because you’re forced to stop charging. With solutions like balance transfers and consolidation loans, there’s nothing to stop you from running your balances right back up. That’s why these DIY solutions often fail.”

The post Are You on a Yo-Yo Diet of Debt Repayment? appeared first on Consolidated Credit.

Your biggest source of debt matters when it comes to your repayment strategy.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

Each year, Northwestern Mutual puts out a Planning & Progress Study that looks at a wide range of financial trends for consumers. This year, they polled 2,003 U.S. adults, including 601 interviews with Millennials (age 18-34).

The big result

As NBC News West 9 reveals, the number one debt for older Millennials is not student loans, as you might expect. It’s credit card debt.

Among older Millennials (age 25-34), credit card debt makes up 25% of their average debt burden. That ties mortgage debt at 25% as well. Student loans only account for 16% of their debt.

The fascinating details

According to NBC News West 9, older Millennials also carry more personal debt than the average consumer. They have an average personal debt balance of $42,000, versus $38,000 for other Americans.

“Long gone are the days when credit cards and student loans only represented a small percentage of the average household’s debt,” says Gary Herman, President of Consolidated Credit. “The fact that credit card debt tied mortgages as the leading source of debt for older Millennials is extremely concerning. It means that we’re moving away from good debt, and taking on too much bad debt.”

The good news is that most Americans, including millennials, list paying off debt as their biggest financial priority for 2018.

• 53% of Americans will focus on debt reduction
• 36% want to revisit their budget
• 29% are saving to achieve a major life goal
• 20% want to focus on retirement savings
• 16% will review their insurance coverage
• 16% want to rebalance their investments
• 14% say their focus is on improving tax planning
• 11% are reviewing beneficiaries
• 7% want to get a financial advisor
• 6% have other financial goals

If you notice, that’s well over 100%, meaning that many Americans are trying to accomplish more than one goal this year. That’s a good thing because financial balance is important if you want to achieve success. But Herman says trying to do everything at once is a good way to ensure you don’t accomplish anything.

“You want to find priorities that fit well together so that you can focus your attention and start moving in the right direction,” Herman advises. “For example, establishing and balancing a budget is often the first step to making an effective debt management plan. But if you’re trying to focus on insurance, debt, retirement, short-term savings and tax planning all at once you may need to pick one or two goals to focus on first.”

What you can do… and why the source of debt matters for your financial strategy

“When it comes to debt, there are good debts and bad debts,” Herman explains. “Good debts give you something of value. Mortgages are good debt, because becoming a homeowner gives you a good, stable asset that builds value long-term. And it’s worth noting, student loans are good debt, too. Although they can create an incredible burden when it comes to debt repayment, they also give you the means to increase your lifetime earning potential. The ability to earn a better income and advance your career is good for your finances long-term.”

By contrast, credit card debt is bad debt. You don’t get anything from making charges on a credit card that improves your financial standing. You may cover a daily expense if you’re short on cash or an unexpected emergency, which keeps you stable in the short-term. But long-term that high interest rate credit card debt is bad for your finances. Purchases on credit usually end up cost you more, especially if you’re carrying balances over month-to-month.

“If you carry credit card balances every month and they never seem to go down, you’re throwing money away,” Herman argues. “You need to find a way to pay off your balances, so you can achieve financial stability. That way, you can focus on achieving major life goals, such as buying your first home. Then your biggest source of debt will be your mortgage, and that’s a good thing. That’s the way it should be.”

The post Millennials’ Biggest Source of Debt Might Surprise You appeared first on Consolidated Credit.

Financial stress leads to depression, missed opportunities and fights with your loved ones. But there are things you can do to minimize financial anxiety.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

Each year, Northwestern Mutual releases their annual Planning and Progress Study. It covers a variety of topics, from how families are faring with debt, to how confident they feel about the future. We recently covered Millennials and Debt, which revealed that Millennials now owe just as much to credit card companies as they do to mortgage lenders.

This week, we’re covering the Money and Emotions side of things. Namely, on how much financial stress impacts that average person’s life.

The big result

According to the survey results, 87% of Americans believe that financial security is critical to overall emotional well-being. In other words, when your money isn’t right, the stress bleeds over into other aspects of your life. It’s hard to be happy if you’re worried about over-drafting your checking account before your next paycheck.

The fascinating details

Interestingly enough, insecurity, fear, and anxiety aren’t the only emotions we feel because of our finances. At least some of the time, we feel pretty good about where we are:

• 68% of Americans feel happy about their financial outlook at least some of the time
• But…
  • 48% of us feel afraid at least some of the time
  • 54% feel financial anxiety at least sometimes
  • 52% feel insecure at least some of the time

So basically, this supports the idea that Americans are on a yo-yo diet of financial stability. We work to get ahead, so we feel good. Then we get set back – usually by an unexpected expense – and then we’re right back to being financially stressed.

In fact, financial stress is the leading source of stress in people’s lives right now:

• 44% say money is their dominant source of stress
• Only 25% said it came from relationships
• And a mere 18% said it was job-related stresses

So, what financial issues are stressing Americans the most? Unexpected expenses, particularly those that relate to healthcare.

What you can do

“Most of people’s biggest sources of financial anxiety are all interrelated,” says Gary Herman, President of Consolidated Credit. “Healthcare is a huge uncertainty in our country right now. So, even if you have health insurance, it can still be a significant source of stress. Then you also have a situation where families are struggling to save. No money in savings, means unplanned health emergencies will wind up on high interest rate credit cards. That, in turn, leaves you less money to save. It’s a vicious cycle.”

Herman says to break the cycle that most people need to get real with their finances. This means sitting down to do a serious assessment of where you are and where you need to be.

“Just having a plan in place goes a long way to minimize financial anxiety,” Herman argues. “Even if you’re not where you need to be yet, knowing that you have a plan for how to get to Point B can give you peace of mind. So, you need to take a good, long look at your finances (and your physical health) to figure out smart ways to reduce financial stress.

#1: Review your insurance coverage, so you can  identify potential pitfalls

“Fear of the unknown plays a big role in financial anxiety caused by healthcare challenges,” Herman explains. “You may have this fear in the back of your mind that you’re going to need a procedure that won’t be covered by your current insurance. Even if you have good coverage, this fear can still be present, because our healthcare system is so uncertain.”

This means that you should review your policies to see exactly what’s covered and what isn’t. Will you be covered for a trip to the ER? What if you need an ambulance? Are things like MRIs covered if you need one?

The more you know about what’s covered, the less you’ll fear the uncertain future. In addition, it gives you an opportunity to identify potential expensive pitfalls ahead of time. That way, you can plan effectively to avoid them.

#2: Consider gap insurance coverage

“There are many gap insurance coverage options available in our healthcare system today,” Herman continues. “Many employers offer gap coverage, which covers things like MRIs and other out-of-pocket costs that wouldn’t be covered with standard insurance. These options literally fill the gap, when something bad happens.”

If your employer doesn’t offer gap insurance, there are private options as well, such as Aflac. These gap insurance policies may even cover regular expenses for a period of time if you are unable to work.

“Gap insurance may be an extra cost, but it can be extremely useful for avoiding out-of-pocket costs,” Herman says. “If you can find ways to cut back in your budget so you can cover the additional cost, it can give you a lot of peace of mind.”

#3: Prioritize savings

“I think one of the biggest problems that Americans face today is that most households just aren’t saving,” Herman continues. “If you don’t have any financial safety net to catch you in case something big happens, that will be a significant source of financial stress. Again, it’s the fear of the unknown and not being prepared for what could come.”

Herman argues that many families aren’t prioritizing savings because they’re too focused on paying off debt. If you have a balanced budget, you should be able to do both things at the same time. If you can’t, it’s probably because you’re spending too much money on debt payments each month.

“Stop struggling with traditional monthly payments – particularly minimum credit card payments – that get you nowhere fast,” Herman says. “Solutions like debt consolidation can make it faster, easier and more cost-effective each month to repay your debt. These solutions often reduce your total monthly payments, which would free up money now, so you can save. You don’t have to be debt free to start saving. With the right strategy, you can do both.”

The post Is Financial Anxiety Keeping You Up at Night? appeared first on Consolidated Credit.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

WalletHub conducted a study about the average credit card debt in America and which cities have the worst debt. Using credit data from TransUnion, they looked at over 2,500 cities and considered the median credit card debt, the cost to pay it off, and the months and days it would take to pay the debt off. This data allowed WalletHub to arrange cities based on the big picture of their debt burden.

The big result

These 5 cities are in the highest percentile for debt burden (starting with the worst):

1. Colleyville, TX
   1. Median credit card debt: $5,593
   2. Cost to pay off: $880
   3. Months & days until payoff: 24 months, 28 days
2. Darien, CT
   1. Median credit card debt: $7,935
   2. Cost to pay off: $1,167
   3. Months & days until payoff: 23 months, 8 days
3. Park City, UT
   1. Median credit card debt: $5,376
   2. Cost to pay off: $720
   3. Months & days until payoff: 21 months, 5 days
4. Fairbanks, AK
   1. Median credit card debt: $4,655
   2. Cost to pay off: $620
   3. Months & days until payoff: 21 months, 2 days
5. Summit, NJ
   1. Median credit card debt: $4,953
   2. Cost to pay off: $655
   3. Months & days until payoff: 20 months, 29 days

And these 5 cities are in the lowest percentile for debt burden (starting with the best):

1. Carmel, IN
   1. Median credit card debt: $3,646
   2. Cost to pay off: $64
   3. Months & days until payoff: 2 months, 1 day
2. Gainesville, TX
   1. Median credit card debt: $2,428
   2. Cost to pay off: $45
   3. Months & days until payoff: 2 months, 14 days
3. Lake Forest, IL
   1. Median credit card debt: $6,030
   2. Cost to pay off: $113
   3. Months & days until payoff: 2 months, 16 days
4. Bastrop, LA
   1. Median credit card debt: $1,647
   2. Cost to pay off: $41
   3. >Months & days until payoff: 3 months,11 days
5. Allen, TX
   1. Median credit card debt: $3,780
   2. Cost to pay off: $95
   3. Months & days until payoff: 3 months, 16 days

The fascinating details

This graphic shows the cities in WalletHub’s study of the average credit card debt in America and their corresponding percentile:

What you can do

“People need to be more aware of how much debt they carry relative to their income,” explains Gary Herman, President of Consolidated Credit. “If you make less, it means you have less breathing room to run up debt. Checking your credit card debt ratio is a good way to make sure you’re not overextended.”

Credit card debt ratio measures how much revolving debt you have relative to your income. It compares the total minimum payment requirements on your credit cards to your total monthly income. Ideally, your ratio should never exceed more than 10%. So, if you make $3,000 per month, your total credit card payment requirements should never exceed $300.

“Checking your credit card debt ratio gives you an easy way to see where you’re overextended with credit card debt,” Herman continues. “People with the highest credit card debt burdens tend to have lower credit scores and more problems with late payments. Knowing your ratio can give you the early warning sign you need to find solutions before debt becomes a real problem.”

Herman also argues that carrying balances over month-to-month costs households more than they think. He recommends people who can’t pay off their balances in full every month need to take the following steps:

1. Make a budget that cuts back discretionary expenses (wants) as much as possible.
2. This allows you to maximize cash flow to repay credit card debt faster.
3. Total up your balances to see how much you owe.
4. If you owe less than $5,000, implement a debt reduction plan. Start by paying off the highest APR balance first to save money on interest charges.
5. If you owe more than $5,000, explore options for debt consolidation. If you have good credit, you can consolidate on your own. For card users with less-than-perfect credit, you may need professional assistance through a debt management program.

“Carrying big balances also isn’t helping consumers’ credit scores,” Herman explains. “If you’re using more than thirty percent of your total available credit limit, having that much debt is hurting your credit score. Ideally, you want to use less than 10 percent of your available limit.”

By eliminating debt and keeping balances low, you boost your credit score and have an easier time maintaining a low debt-to-income ratio. This makes it easier to qualify for good interest rates and better terms on loans and new credit cards. If you’re working to achieve homeownership, having no credit card debt to repay means you have more money to save for a down payment.

The post Who Has the Worst Average Credit Card Debt in America? appeared first on Consolidated Credit.

California has the most credit card debt in total, but Nevada had the biggest gains over a year.

Consolidated Credit searches for financial research that can help you understand consumer debt in the U.S. That way, you can make practical plans to deal with your debt and budget. This week…

The interesting study

Experian has released an update to their annual State of Credit Cards report. This report looks at how U.S. consumers are fairing when it comes to credit cards and credit usage. The study looks at factors such as average credit card debt by state, most popular credit cards and average credit limits.

This latest study explores total credit card debt by state, including who had the biggest gains year over year. It also looks at the percentage of accounts that are delinquent in each state. Accounts officially become delinquent when they are more than 90 days past due.

The big result

When it comes to which state has the most total credit card debt, California tops the list. California consumer credit card debt tops out at over $104 billion. But when you consider that California has the highest population in the U.S. (and one of the highest average cost of living), it’s not all that surprising that they top the list for total unsecured debt.

What’s more surprising is the states that have had the biggest gains in total debt from 2017 to 2018.  If you look at these gains, Nevada has added the most debt over the past year. Their total credit card debt grew by 8.5% in 12 months.

The fascinating details

Nevada credit users also have one of the highest delinquency rates in the U.S as well. Overall, 2.1% of Nevadans have delinquent credit card debt. That puts them at the third highest delinquency rate in the U.S.

• Arizona 2.32%
• Mississippi 2.21%
• Nevada 2.1%

According to Experian’s data, credit card debt problems are increasing across the U.S. Almost 60% of Americans have at least one credit card as of the end of 2018. The average balance crept up 11% from 2017.

Experian’s new study did not provide the average credit card debt by state or the average number of cards by state, but here is where those numbers stood at the end of last year. Given that balances have increased since last year, these numbers are undoubtedly higher now…

Here were the Top 5 highest and lowest average credit card debt by state, as last reported by Experian:

These were Top 5 highest and the lowest average number of credit cards by state:

What you can do

“Most Americans could benefit from focusing on paying off debt in 2019,” says Gary Herman, President of Consolidated Credit. “Reducing credit card debt offers several benefits. It’s good for your credit, debt-to-income ratio and budget.”

1. First, paying off credit card debt helps you save money by eliminating high interest rate debt that costs you every month you carry a balance.
2. Next, if you eliminate a debt, you eliminate a bill, which frees up cash flow in your budget; that makes it easier to afford all your monthly expenses.
3. As you pay off balances, you also decrease your credit utilization ratio, which is the second biggest factor used in credit scoring.
4. Finally, cutting debt decreases your debt-to-income ratio. This not only makes you more financially stable, it makes you more creditworthy to lenders and creditors. That could be key if you plan on applying for new financing this year.

“There’s no good reason that you need to carry a credit card balance,” Herman continues. “It’s not good for your credit score and it’s hard on your budget. The idea that carrying balances improve your credit score is a myth. It’s better for your score to pay off your debt and get to zero. Plus, then you can make charges and pay them off in full at the end of each month. This strategy allows you to use credit interest-free.”

The post A Snapshot of Credit Card Debt by State in 2019 appeared first on Consolidated Credit.

What a difference a year can make. Last year, Valentine’s Day spending hit an all-time high, with people spending nearly $200 to spread the love. But just a few weeks later the pandemic hit the U.S. and changed everything, from household income to our perspectives about money. So, it’s not surprising that this year has seen a record drop in spending—down $32 on average per person this year.

How couples are cutting back

Nearly half of that decrease comes from reduced spending on significant others. Consumers say they will spend $13 less on their sweetheart this year. Another big drop this year is understandable—41 percent of couples plan to celebrate at home instead of going out.

Most partners are on board with saving

While decreased spending is due at least in part to a desire to socially distance and avoid crowded restaurants, another reason is that couples are simply being more frugal. A LendingTree survey found that 40 percent of Americans plan to skip Valentine’s Day entirely to save money.

What’s more, the survey found that most people wouldn’t be upset if their partner suggested scaling back or skipping expensive gifts entirely. Only 18% of women and 9% said they would be upset.

That’s a statistic that Consolidated Credit’s financial education director thinks more people should pay attention to.

“Too often, we feel obligated to do grand gestures and gifts to show our love to our spouse or partner,” says April Lewis-Parks. “You may be scared to brooch the subject with your significant other. But this survey shows that they might be more receptive to the idea than you think.”

Lewis-Parks encourages couples to talk about their plans.

• See how both of you are feeling about your finances.
• If one or both of you has financial concerns, talk about setting limits on gifts.
• For spouses or couples that are cohabitating, consider pooling money to get something that you need for the house instead,

If you are planning to spend, avoid credit card debt

While couples are planning on cutting back this year, those cuts don’t necessarily mean that couples will avoid taking on credit card debt. The LendingTree survey found that 38% of consumers with a significant other may take on credit card debt to cover at least part of their Valentine’s Day spending. Even worse, 30% say they won’t tell their spouse.

“With the economy still unstable and a slow pandemic recovery, it’s important to avoid credit card debt whenever possible,” Lewis-Parks says. “If you can’t get a gift for your significant other without taking on credit card debt, be honest. Share your financial situation and discuss the idea of scaling back. As the stats above reveal, your partner may be more receptive than you think.”

She also says hiding your financial situation from your partner is more damaging than you might think.

“People consider financial infidelity as bad as physically cheating,” she explains. “If your spouse finds out that you’re not being transparent about your finances, particularly when it comes to debt and hiding spending, your relationship may be short-lived.”

In fact, a survey by the American Institute of CPAs found that 41% of cohabitating people say they might consider ending the relationship over financial infidelity. A separate WalletHub survey found that 47% of people would break up with a financially irresponsible partner. That survey also found that 44% of people find irresponsible spending more odious than bad breath.

“While you might think that your partner would appreciate the quiet sacrifice that you’re making to get them a gift on credit and then hide the debt, what you’re really doing is hurting your relationship.”

Come up with a practical Valentine’s Day spending plan

Even if you plan on limiting gift expenses or eating in this year, it’s important to plan how much you will spend. Use this free Valentine’s Day spending planner to set a realistic budget. If you’re married or cohabitating, share the love and set the budget together.

The post Valentine’s Day Spending: Couples Scale Back in 2021 appeared first on Consolidated Credit.

The 15^th annual America Saves encourages you to save with a goal in mind.

It’s America Saves Week—a week dedicated to helping Americans focus on saving to improve their financial lives. From Monday, February 22 to Friday, February 26, thousands of nonprofit, government agencies and private organizations will join the cause. The goal? To help people adopt better saving habits in the United States.

The objective of this year’s America Saves Week is to promote different reasons to save money, always emphasizing the importance of doing so. The ASW nonprofit organization has designated different theme for each day to promote a dialogue about savings throughout the week.

Monday, February 22: Save automatically

The first day of America Saves focuses on teaching people the best way to save money. Putting savings on autopilot is often the best way to kickstart a healthy saving strategy. You determine how much you can save, then you build the amount into your budget.

“You should think of savings like a bill you pay yourself,” says April Lewis-Parks, Financial Education Director for Consolidated Credit. “Then you find a way to start saving automatically.”

There are plenty of ways that you can make savings automatic, from splitting your paychecks to send money directly to saving, to using a spare change app that rounds up purchases and invests the difference. The more you can automate your savings, the more consistently you can save.

Learn how to make savings automatic »

Tuesday, February 23: Save for the Unexpected

Unexpected expenses are a leading cause of debt problems for Americans. Whether it’s a medical emergency, a car accident, or an expensive home repair, unexpected life events can derail your finances if you don’t save effectively, In fact,  40% of Americans do not have enough saved to cover a $400 emergency.

Sari Mazon, a teacher who participates in the America Saves initiatives, tells her story about emergency savings: “When I was a child, my family didn’t really talk about saving, there was no concrete plan for the next. Having to create the habit of saving and creating a savings plan as an adult was really a challenge.”

Mazon confesses that getting used to saving felt like giving up her money. But after developing the habit and establishing an automatic savings plan, now she and her family work continuously on different savings goals. “It is very important to make good financial decisions, not only for us as a young family… but also to teach our children these valuable lessons,” she explains.

While it’s impossible to predict what may happen, you can still plan for life events that may occur. Doing so means you will be less likely to face financial hardship and debt.

Learn how to save effectively for unexpected life events »

Wednesday, February 24: Save to Retire

Most Americans are significantly behind in retirement savings. In fact, very few people in the United States have an adequate retirement plan for their life expectancy during retirement.

As part of Savings Week, America Saves also collected some expert advice to meet the challenges of saving for retirement.

Attiya Ingram, financial advisor

No amount is too small. Those ‘two or three’ dollars that you set apart each time, will add up. If at the end of the month you managed to save $150, after 40 years, that $150 per month will become a million dollars.

Maggie Boys, communication director, Institute for Women’s Safe Retirement

Calculate your retirement needs. Look at the W-2 form your employer gives you and multiply your salary (before taxes) by 20 years. That number may be less alarming than the numbers you probably imagine.

Dr. Martin Lowery, retired

Don’t forget about Social Security. It may not seem like a lot of money, but that extra money for retirement is very important… because it can be scary to approach that 65-year threshold thinking that your retirement money will not be enough.

Build a better retirement saving strategy »

Thursday, February 25: Save by Reducing Debt

When we talk about America Saves Week and everything that it promotes, there is something that is not said so much: paying debts IS saving! By reducing credit card debt, you save the money you’ve been spending paying off interest charges..

In the same way, when you make your payments on time, you will save on late fees and maintain a healthy credit score, which translates into long-term savings.

“When you pay and reduce your debt, you put yourself in a position to faster achieve that financial stability that you want so much,” explains Jen Hemphill, financial advisor and host of her podcast Her Dinero Matters. “In addition, you can redirect those savings to whatever you need, instead of having to focus on living from paycheck to paycheck.”

Learn how to save by reducing credit card debt »

Friday, February 26: Save as a Family

The best way to teach your children good savings habits is to be a living example of good savings habits for them. Although most people understand the importance of making good financial decisions, a good part of them think that they did not receive adequate financial education during their youth.

This year, America Saves Week concludes with a day dedicated to adopting healthy financial habits as a family, including teaching kids the value of saving.

Meeka Caldwell, a mother of four children, learned the value of money earned as a child. She and her husband have carried those practices to involve all the family in their mission to save.

“Definitely, one of the ways we save as a family is to stay at home and have fun with board games, instead of going out and spending in entertainment centers or other places.” So, says Caldwell, she teaches children to save while at the same time saving for the next vacation.

The Caldwells are also responsible for teaching their children to limit the use of water and turn off the lights when leaving to save even more. “Our goal is for our children to understand the value of saving money, because thus, saving will be much easier for them than it was for us,” Meeka points out.

Find more tips for saving as a family »

America Saves is a nonprofit organization that uses the principles of behavioral economics to motivate, encourage and support ordinary people to save money, reduce debt and create better financial habits.

The post America Saves Week 2021 appeared first on Consolidated Credit.