Americans hold more credit-card debt than ever

Credit-card debt in the US rose in June to surpass the peak set just before the 2008 financial crisis.

Outstanding revolving credit, which includes credit-card debt, rose to $1.02 trillion in June, according to a monthly report from the Federal Reserve released on Monday.

Missed debt payments have declined from the recession era, when several homes were foreclosed on because their owners got loans they wouldn't have qualified for with tighter rules.

But defaults are rising again for credit cards and auto loans. The New York Federal Reserve observed a 7.5% rise in the share of credit-card balances that were seriously delinquent in the first quarter, or at least 90 days past due.

"We simply can't keep taking on credit card debt forever without it causing major problems," said Matt Schulz, the senior analyst at CreditCards.com. "This record probably won't be a major tipping point, but it likely isn't too far off."revolving consumer creditAndy Kiersz/Business Insider; data from the Federal Reserve

Besides the New York Fed, several credit-card providers are reporting a rise in defaults. Synchrony Financial, one of the largest providers of store cards, said its provisions for loan losses — what it uses to cover for missed payments — jumped 30% year-on-year to $1.33 billion in the second quarter. That was partly because it lent out more dollars.

At American Express, loan loss provisions rose 26% from last year. And, Capital One said its charge-off rate, or the share of balances it was unable to collect, rose to 5.1% in the second quarter from 4.07% a year earlier.

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The states with the worst credit card habits
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The states with the worst credit card habits

1. Florida

According to our data, the Sunshine State is one of the most credit card debt-burdened in the country. On a per capita basis, Florida residents have $2,910 in credit card debt. While the state only ranks 14th for that metric, it becomes worse when income is taken into consideration. Florida ranks second in the nation for credit card debt as a percent of income. Credit card debt per capita equals 11.5% of median annual individual income in Florida. Florida residents also seem to be feeling the pressure of that mounting debt as they have the second-highest credit card delinquency rate in the country.

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2. Georgia

Florida’s neighbor, Georgia, comes in second. Residents of the Peach State appear to be fond of using their credit cards. Our data tells us that on average Georgia residents have a credit card utilization of 34.8%. That’s the highest in the top 10 and second-highest in the nation. Georgia residents also seem to struggle to make their credit card payments on time. Our data shows us that almost 60% of payments made in Georgia are late.

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3. (tie) Nevada

Nevada leads the nation in its delinquency rate, with just under 11% of all credit card debt being more than 90 days delinquent. While putting off paying credit card debt may offer short-term reprieve to Nevada residents, not making those payments may hurt their credit scores in the long term. Current data shows that Nevada residents use about 32.7% of their credit limit on average.

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3. (tie) Texas 

They say everything is bigger in Texas. Except, perhaps, credit card debt. Texas residents hold $2,760 in credit card debt per capita. That translates to 10.1% of median annual income. If we only considered those two metrics, Texas would not be in the top 10. However residents in Texas have a tough time making payments on time. The Lone Star State ranks second for late payment rate, with over 60% of credit card payments being late.

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5. Arizona

The Grand Canyon State ranks fifth in our study of the states with the worst credit card habits. For the average resident of Arizona to pay off his credit card debt in its entirety he would need to fork over 10.5% of his annual income. This may not be a bad strategy for some Arizona residents as it would allow them to lower their utilization rate. Our data shows that, on average, Arizona residents are using 31.2% of their credit limit.

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6. North Carolina

Another Southern state, North Carolina, cracks our top 10. Residents of the Tar Heel State struggle to pay their credit card debt. Just under half of credit card payments are made late, which is the ninth-worst rate in the study. However North Carolina residents only carry $2,600 in credit card debt per capita, an above average score. One concern however is that credit card debt on the rise. In 2014, the average North Carolina resident held $2,500 in credit card debt, while in 2015 that figure was $2,600. That is a growth of 4%.

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7. (tie) California

In a recent article we found that California is the most debt-saddled state in the union, so it is no huge surprise to see them in this top 10. California residents carry the second-highest amount of credit card debt in the top 10. On a per capita basis residents owe $3,060 to credit card companies. The picture looks worse once we take income into consideration. The median individual annual income in California is $28,068. So paying off the per capita credit card debt in full would require 10.9% of the average Californian’s income. For that metric California ranks fifth in the country.

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7. (tie) New Mexico

Residents of the Land of Enchantment are tied with the Golden State when it comes to bad credit card habits. New Mexico residents tend to make late credit card payments. Almost 47% of credit card payments in New Mexico are late. As we mentioned previously, late payments can cause your credit score to take a hit. Plus, a large chuck of credit card debt in New Mexico is delinquent. New Mexico ranks in the top 15 for both those metrics.

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9. (tie) New York

Few residents carry as much credit card debt as those in New York state. New York residents have $3,380 in credit card debt per capita. That’s equal to around 11.1% of the state’s annual individual median income. For both those metrics, New York ranks in the top 10. Interestingly, despite those high debt numbers, New Yorkers tend to pay their credit card bills on time. Only around 35% of credit card payments are late, which ranks 29th in the country, a score almost good enough to drag New York out of the top 10. 

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9. (tie) South Carolina

South Carolina residents take the opposite attitude to credit card debt than New York residents do. In South Carolina residents carry $2,380 in credit card debt per capita, which is only 9.6% of median individual annual income. If those two metrics were the only ones we considered, South Carolina would be nowhere near the top 10. And yet, despite the relatively small amount of debt they carry, South Carolina residents appear to struggle to pay it off on time. Over 8% of credit card debt in South Carolina is delinquent and 54.6% of payments are made late. In both these metrics, South Carolina ranks fifth.

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"It's worrisome that we are starting to see delinquency rates now begin to rise even with the unemployment rate at a cycle low," said David Rosenberg, the chief economist at Gluskin Sheff, in a note on Tuesday.

"This tells me that we are seeing escalating credit strains that have little to do just yet with a weakening economy — evidence that once again, very risky loans were extended this cycle to marginal if not sketchy borrowers."

Rosenberg said credit growth has run far in excess of work-based wage growth. And, if banks tighten their lending standards, it could reduce the contribution that spending makes to economic growth.

"This record should serve as a wake-up call to Americans to focus on their credit card debt," Schulz said.

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