Debt. Nobody likes it, but we all have a certain amount of debt on our household ledger. 2020 has been a strange year in terms of household finances – on the one hand, many Americans suddenly found themselves without a job; on the other hand, spending on many items has decreased and the government has sent help. Yet, according to a report by the Federal Reserve, household debt reached $ 14.6 trillion – that is, trillions with a T – by the end of 2020, an increase of $ 414 billion.
Much of this debt was due to people taking advantage of low interest rates to refinance their homes or buy new homes away from crowded cities, as remote working made travel less necessary. Mortgage debt topped $ 10 trillion for the first time, an increase of $ 486 billion in 2020. This is the best city that Americans move to.
While student debt and auto debt also rose, albeit at a much more modest pace, consumers were apparently watching their credit card accounts closely, even though their paychecks had declined. Credit card debt actually fell from $ 108 billion to $ 820 billion, reports the Federal Reserve. The stimulus checks may have helped reduce credit card debt.
To identify how many people in each state are burdened with credit card debt, 24/7 Wall St. looked at data from the Urban Institute’s “Credit health during the COVID-19 pandemic. “We ranked states based on the credit card default rate – the share of consumers with a credit or charge card who are 30 days or more late – as of October 2020, the latest available. The additional data of the report include the median credit score for each state, also for October 2020.
Nationally, the credit card default rate declined to 4.06% in October 2020 from 5.92% in February 2020. Median credit scores have meanwhile increased from 693 in February 2020 to 704 nine months later. (These are the states with the most mortgage debt.)
Across all states, credit card default rates – accounts over 30 days late – range from 2.65% to 6.73%. States with higher poverty rates and a higher share of people without medical insurance, the uninsured rate, tend to have higher credit card default rates and lower credit scores.
Sadly, the pandemic may have forced more people into poverty. According to Census office, the poverty rate in the United States last year rose 1.0 percentage point to 11.4 percent, from 10.5 percent in 2019. This reversed a five-year drop in the poverty rate.
Not only did poverty increase in 2020, but so did unemployment. The annual unemployment rate in 2020 was 8.1%, according to the Bureau of Labor Statistics, peaking at 14.8% in April 2020. The unemployment rate has trended downward since then, falling to 4. 6% last October. As more and more people return to work, they will have more money in their pockets to spend – and perhaps reduce their debt burden even further.
Click here to see how many people in your state are burdened with credit card debt
To identify how many people in each state are burdened with credit card debt, 24/7 Wall St. looked at data from the nonprofit Urban Institute’s think tank. Credit health during the COVID-19 pandemic characteristic. We’ve ranked states based on the credit card default rate – the share of consumers with a credit or charge card who are 30 days or more past due – as of October 2020, the latest available.
Each state’s median credit score – the median Vantage score (300 to 850) of people with a credit bureau file – is also taken from the Urban Institute report and is for October 2020, the most recent available. The Urban Institute dataset contains information derived from anonymized consumer-level records from a major nationwide credit bureau.
Additional data on the poverty rate and the uninsurance rate are annual estimates from the 2019 Census Bureau American Community Survey. Data on the unemployment rate for 2020 comes from the Bureau of Labor Statistics.