US Credit Card Debt Surpasses $1T: See Debt Ratio In MA

MASSACHUSETTS — For every $1 of income, households in Massachusetts hold $1.26 in debt, according to a new analysis of Federal Reserve data by USAFacts.org. The report comes as the Fed announced Tuesday that Americans amassed more than $1 trillion in credit card debt for the first time.

States with the highest debt relative to income tend to be located in the West, according to the analysis. Hawaii has the highest debt-to-income ratio in the nation, with households holding $2.27 of debt for every $1 of income. Idaho has the second highest at $2.07, followed by Maryland at $1.97.

On the other end of the spectrum, states in the Midwest tend to have the lowest debt-to-income ratios. That includes states such as Illinois, Iowa, Ohio and Kentucky, where households hold about $1.16-$1.18 of debt for every dollar of income.

Notably, New York appears to stand out as an outlier on the East Coast, where residents hold just $0.97 of debt per dollar of income.

“It’s difficult to attribute this variation in household debt ratios to a singular cause, as they can be influenced by a combination of economic, demographic, and social circumstances,” the authors wrote.

They added: “However, certain factors, such as the relative cost of living by state, changes in property values, or the cost of education, could be partially responsible.”

Rising inflation and interest rates have played a factor, as have stagnating monthly incomes and auto loan debt.

Another factor: Credit card debt.

In its Quarterly Report on Household Debt and Credit, the Fed said Tuesday that total household debt in the second quarter of 2023 increased slightly by $16 billion — or 0.1% — to $17.06 trillion.

Credit card balances increased by $45 billion, from $986 billion in the first quarter, to a series high of $1.03 trillion in the second quarter. That marked a 4.6% quarterly increase, the Fed said.

Compared to other debt categories, credit card balances saw the “most pronounced worsening in performance, following a period of extraordinarily low delinquency rates during the pandemic,” the Fed wrote.

“Credit card balances saw brisk growth in the second quarter,” said Joelle Scally, regional economic principal within the Household and Public Policy Research Division at the New York Fed. “And while delinquency rates have edged up, they appear to have normalized to pre-pandemic levels.”