Nearly 25 percent of Americans have more credit card debt than savings

Americans seem to have a funny relationship with credit card debt and savings -- namely, they tend to rack up a ton of the former, and not enough of the latter. In fact, only 52% of Americans have emergency savings that exceed their outstanding credit card balances. This data comes from a 2017 Bankrate study, which also found that 24% of U.S. adults actually have more credit card debt than money in the bank.

Of course, not all Americans are deeply indebted -- a good 17% claim they don't owe a dime on their credit cards. Unfortunately, these same folks also have no savings to show for.

10 US states with the most debt:

The 10 US states with the most debt
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The 10 US states with the most debt

1. California

California has the highest debt-to-income ratio in the country. Residents of the Golden State make about $28,000 annually on average, according to U.S. Census Bureau data. The New York Federal Reserve Bank shows that Californians have a per resident debt balance of $65,740. This gives Californians a debt-to-income ratio of 2.34 on average. Like many other states, most of Californians’ debt is held up in their mortgages. Californians owe about $51,190 on their mortgages on a per capita basis. 

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2. Hawaii

Hawaii comes in second with a debt-to-income ratio of 2.1. On average Hawaiians make slightly more than Golden State residents. The median income in Hawaii is $31,905 as compared to $28,068 in California. Residents of Hawaii also have slightly more debt per capita than those in California: $67,010 to $65,740. Hawaiians have the second-highest proportion of debt tied up in mortgage. In total, $51,770 out of the total $67,010 in per capita debt that Hawaiians hold is owed on mortgages. That means 77% of per capita debt is mortgage debt. 

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3. Virginia

Virginia comes in third with a debt-to-income ratio just below 2. The average Virginian makes about $31,557 and has $62,520 in debt. One reason why lenders may feel safe lending to Virginians, allowing them to have a high debt-to-income ratio, is their low delinquency rates. Only 1.27% of mortgage debt in Virginia is delinquent by at least 90 days. That is the 13th-lowest rate in the country. Virginia also has a relatively high proportion of its debt in student loans (7.76%).

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4. Colorado

Of Colorado’s total debt, 6.85% is tied up in automobile debt. That’s the second-highest rate in the top 10. However it is quite a bit lower than the national average of 9.57%. Overall there is not much separating Colorado from Virginia: Colorado has a debt-to-income ratio of 1.96. The median income in Colorado is $31,664 and the per capita debt is $62,200.

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5. Utah

Like the rest of the top 10, Utah residents have the vast majority of their debt tied up in mortgages. Utah residents have $52,150 in per capita debt, $38,240 of which is mortgage debt. The state also has one of the lowest delinquency rates for mortgage debt. Only 1.05% of mortgage debt is 90 days past due in Utah. Again this may partially explain why lenders are so willing to lend to Utahans looking for mortgages. 

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6. Washington, D.C.

Almost 15% of all debt held in the nation’s capital is owed on student loan debt. All that higher education may be paying off though. D.C. has the highest median income in the country and over half of the population over the age of 25 has at least a bachelor’s degree. In fact, there are more people over the age of 25 in D.C. with a graduate degree (32.3%) than there are with only a bachelor’s degree (23.8%). The capital also has the lowest percent of debt in the country tied up in auto loans (3.35%), probably due to the accessible public transportation available in the area. 

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7. Oregon

Oregon has a debt-to-income ratio of 1.89. On average Oregonians make less than many other states in the top 10. The median income in the Beaver State is $26,188, according the U.S. Census Bureau. Oregon also has the least per capita debt in the top 10, at $49,550 per resident. For the most part Oregonians choose to go into debt to buy homes. Over 72% of overall debt is held in mortgages. One area where Oregonians struggle is in paying off credit card debt. Just over 7% of all credit card debt in the state is delinquent. One way to eliminate credit card debt is using a balance transfer credit card. With a balance transfer credit card, new users typically have a limited time to make no-interest payments. 

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8. Washington

Washington, Oregon’s northwest neighbor, comes in eighth for highest debt-to-income ratio. The state has the third-lowest percent of debt tied up in student loans (6.29%) but the third-highest percent of debt tied up in mortgages (75.35%). Washingtonians also tend to be some of the most responsible holders of debt in the country. They rank above average in delinquency rates on all types of debt and rank in the top 10 for lowest rates of auto loan delinquency and credit card delinquency. 

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9. Massachusetts

On average Massachusetts residents earn about $32,352 per year and have about $59,820 in debt per capita. That works out to a debt-to-income ratio of 1.84. Once again, like other states, the majority of that debt is mortgage debt. About 72% of per capita debt in the Bay State is mortgage debt. The state’s residents don’t take on as much credit card debt as other states do. About 5.45% of per capita is tied up in credit card debt

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10. Maryland

The Old Line State rounds out our top 10 states with the highest debt-to-income ratios. Maryland residents are some of the most well-off in the country, with an average individual income of $36,316. In terms of debt, Maryland residents have $67,020 in per capita debt, meaning their debt-to-income ratio is 1.84.

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If your debt level is higher than it should be while your savings seem to have fallen by the wayside, it's time to change your ways immediately. Otherwise, you risk racking up even more debt, which will only impede your savings efforts and leave you financially vulnerable.

Where Americans stand on savings

The more money you've saved, the less desperate you'll be when an unplanned expense hits you, and therefore the less likely you'll be to rack up costly credit card debt. But most Americans are way behind on savings. An estimated 57% have less than $1,000 in the bank, while 39% have no savings at all. Meanwhile, the average U.S. household owes $7,136 in credit card debt. And given the aforementioned numbers, that's not surprising.

Breaking the debt cycle and boosting savings

Clearly, having more debt than savings is not a position you want to be in. The solution? Work on improving both situations simultaneously. And the best way to start? Create a budget. Without one, you'll have no idea where your money is going and where you might manage to cut corners, but if you map out your various expenses, you'll see where you're overspending and where there's room for improvement.

Once you have that budget in place, you'll need to decide which expenses you're willing to slash. You might go big and downsize your living space, thus freeing up several hundred dollars in one fell swoop. Or, you might decide to cut back on takeout meals, clothing, and leisure, the sum of which might total what you'd save by lowering your rent. The choice is yours, but know that you'll most likely need to cut something from your budget if you want to improve your savings level and have a shot at paying off debt.

Furthermore, if your financial situation is pretty dire, you should really consider a side gig to generate extra income. Of the 44 million Americans who currently hold down a second job, more than one-third bring home upward of $500 a month as a result. If you're looking at a $0 savings balance, that's a good way to add a cool $6,000 to your savings account in just a year's time, and without having to slash a ton of expenses in the process.

Of course, once you start spending less and earning more, you'll need to decide whether to pay down your debt first, or add to your savings. Now you may be inclined to go with the former, especially since credit card interest can easily surpass the 20% mark, while most savings accounts today pay 1% if you're lucky. But while focusing on your debt might seem to make the most sense, you should actually prioritize your emergency savings, and only start chipping away at your debt once you have a solid cushion.

Why this approach? It's simple. If you don't have any money in the bank and you encounter another financial emergency, you'll get yourself deeper into debt. Having that money on hand will help you avoid adding to your balance, thus making it even more difficult to pay off. Besides, there are situations in life where you just plain need access to cash. Say your car is towed and you need $200 to get it back, but the tow company only takes cash. At that point, whipping out your credit card isn't an option, and without a little money in the bank, you could run into serious trouble.

Though it's not surprising to learn that so many Americans have debt that exceeds their savings, it's a troublesome statistic nonetheless. And if you're part of it, it's time to turn that ratio around -- immediately.

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