After a brief decline in total outstanding credit card balances at the end of 2023, Americans are back at it. Americans currently owe more than $1.14 trillion, but New Jersey, Connecticut, and Maryland residents lead the charge with the highest credit card debt levels.
But that isn’t the whole story. Throughout the country, costs for goods and services are on the rise. Add that to persistent inflation, and many households feel forced to rely on credit cards to cover everyday expenses.
The good news is that, despite growing financial pressure and climbing balances, it is never too late to dig out of debt and start down the road to prosperity.
States With Most Credit Card Debt
According to Lending Tree, New Jersey has the highest average credit card debt, with the average balance as of the fourth quarter of 2023 at $8,909. Connecticut comes in second with $8,640, followed by Maryland ($8,626), New York ($8,566), and Massachusetts ($8,447).
Mississippi has the lowest average balance of $4,956, with Kentucky ($5,090), Arkansas ($5,363), Alabama ($5,387), and Indiana ($5,501) rounding out the bottom.
Oregon tops the list of states with the fastest-growing balances, with a 7.8% increase from the fourth quarter of 2022 to the fourth quarter of 2023. California ranks second (5.4%), followed by Massachusetts (5.2%), South Dakota (4.4%), and Pennsylvania (3.9%).
All Consumer Debt Rising
Unfortunately, it’s not just credit card debt. Other consumer debt balances — home and student loans, auto loans and leases, medical debt, and personal loans — offer additional insight into consumer struggles.
According to Experian, 49 of the 50 states and the District of Columbia saw increased consumer debt levels from 2022 to 2023. The only state that saw a decline is Wyoming, with a 0.3% decrease.
Jon Dulin, personal finance expert with Money Smart Guides, knows firsthand that consumer debt is rising. “We are coming off a period of close to double digit inflation and wages that were not keeping up. When you have monthly expenses increasing at a rate faster than incomes, consumers are going to end up in the red. While you can reduce your expenses, you can only do so much until you hit a point where it negatively impacts your daily living.”
The states with the highest consumer debt levels include the District of Columbia, with an average debt of $166,186, followed by Colorado with $154,481. Washington ($150,462), California ($148,428), and Hawaii ($147,103) round out the top five.
It is also important to look at the states with the fastest-growing consumer debt levels. Tennessee leads the list with an increase of 6.2%, followed by Texas at 5.4%. Alabama (4.7%), North Carolina (4.5%), and Oklahoma (4.2%) follow.
Consumer Debt by Generation
While most Americans struggle with debt, the amount varies by generation. Gen Z has the lowest consumer debt ($29,820), followed by the Silent Generation with $38,600.
Gen X has the most debt, averaging $157,556. Millennials rank closely behind, with an average of $125,047.
Although all generations have consumer debt, not everyone is adding to it. From 2022 through 2023, baby boomers and the Silent Generation both shed debt, while other generations added to it. This makes sense to Dulin. “Older Americans are not in the market for expensive debt like new housing, vehicles, and taking on student loans like younger generations.”
However, it is not all good news, as all generations’ average credit card debt increased. Millennials lead, with average balances up 15% to $6,521. The Silent Generation has the smallest balance, at $3,412, but that is still up 2.9% compared to the previous year.
Strategies To Dig Out of Debt
It is critical for people to limit the debt they get into and pay off any debts as quickly as possible so they can begin to build wealth.
“When you have debt, you are essentially working to pay someone else. The money you earn is going towards a creditor to pay for something you bought,” Dulin explains. “Once your debt is gone, then the money you earn is paying yourself, which you can use to save and invest to get ahead.”
Dulin and many other financial experts recommend the debt snowball method to manage debt. “This strategy is the best because it motivates users with quick wins. As you pay off your debt, you see fewer monthly debt bills, and this motivates you to keep pushing ahead.”
To make the debt snowball work, consumers organize their debts from smallest balance to largest. They then pay the minimum on all their debts — except for the smallest, which they put all the money they can toward. Once paid off, move on to the next smallest balance.
Another important, often overlooked step? Understanding why the person is in debt in the first place. “Too often, people think they simply have a spending problem for the reason they are in debt. But this is usually a mask for something else happening in their lives, like an unhappy relationship or unsatisfying job. They take out their frustrations by buying things, which makes them feel better. The problem is this feeling is only temporary and people continue to spend,” Dulin adds.
If a person truly wants to get out of debt, they need to dig deep into the root cause. Doing this can significantly reduce the chances of waking up and finding themselves back in debt a few months later, a common reoccurrence for many.
