Vermonters Drowning in Credit Card Debt
August 5, 2019 | By Lou Varricchio
While Americans have been racking up credit card debt during the decade of the 2010s to the tune of $1 trillion, Vermonters hold the embarrassing position as being in third place when it comes to having the worst credit card debt record in the nation.
Only residents of Alaska and the District of Columbia have worse credit card debt records than Vermont while Indiana residents have the least amount of credit card debt in the U.S.
In a new financial report released last week by the online personal website WalletHub, Vermont was in third place with one of the nation’s worst credit card debt pictures; it came in first, overall, with the least sustainable credit card debt record among the 50 states.
Neighboring New Hampshire had less credit card debt and was ranked at 23 with New York being ranked at 34.
According to WalletHub’s Adam McCann, “In order to determine the states with the most and least sustainable credit card debts, we first looked at the median credit card balances and credit card payments of residents in each of 50 states and the District of Columbia as of September 2018, based on TransUnion data. Our analysis includes credit cards that carried a balance and excludes store cards.”
Chicago-based TransUnion, whose data was used in the WalletHub report, is a consumer-credit agency with a database of 200 million-plus “credit-active” American consumers.
It should be noted that the company, along with data competitor Equifax, was fined for misleading consumers regarding some of its credit products. Both TransUnion and Equifax paid a combined $17.6 million in restitution for consumers, and $5.5 million in federal fines, as reported in 2017.
Last week’s WalletHub report shows residents of the Green Mountain State have a median credit card debt of $2,227 with an expected (median) debt-payoff time of 15 months and 14 days. With a median income of $45,058, Vermonters’ cost of credit card interest to payoff was $247.
One of the financial experts WalletHub consulted to compile last week’s report was Debra Blatz, a professor of marketing at St. Edwards University in Austin, Texas.
Blatz noted that bad behavior on a daily basis can rack up credit debt as seen in the Vermont data.
“Not setting financial goals leads to spending and not accomplishing anything like buying a house or having a reliable car or saving for retirement,” according to Blatz. “Not having a budget means people spend more money than they have without realizing it.
“Little things mount up,” she warned.
Blatz likes to use the Starbuck’s Coffee “habit” example of how personal debt can get out of control.
An average Starbucks customer spends $5.90 a day for a cup of the high-end coffee. Figuring 4.2 visits per week, the customer spends $23.30 weekly for a coffee fix.
Blatz isn’t optimistic about the behavior of Vermonters and others over time.
“We have a consumer-based economy,” she noted. “I am not sure what we can do to incent people to save in this environment. I was raised by two people who went through the Great Depression. They ingrained in me to save and to live below my income. Unless saving becomes part of our culture and something that is an attractive trait, I don’t know what we can do.”
Beyond WalletHub’s less-than-sterling credit card debt picture for Vermont, several local experts, such as economist Art Woolf of the University of Vermont (UVM), report more often on other factors, perhaps more worrying, clouding the state’s economic sustainability for its residents.
For example, Woolf has been citing Vermont’s demographics — its aging population, declining birth rates and contracting work-force — among the more worrying signs, for more than a decade.
“In 15 years, roughly 1 in 4 Vermonters will be over the age of 65,” Woolf wrote on a UVM blogsite. “Obviously that means that there’s not as many people working or available to work. … I think what we need to do to reverse this demographic decline is try to make Vermont a very inviting place, not only for people of any age to come, but especially for businesses to come or to expand. And the two of them are going to work together.”
But when it comes to the personal credit card debt of Vermonters — and anyone else for that matter – WalletHub report expert Brandon Ware, associate professor of business at Biola University’s Crowell School of Business in LaMirada, California, cautions folks to avoid plastic whenever possible.
“My advice would be to pay cash for everything, find an additional revenue source to help reduce the debt (and) be able to categorize future purchases,” he noted. “Is it a need, is it a want, or is it a desire?”
There is a drastic step any Vermonter can take to reduce his or her mounting credit card debt; that’s where the non-profit American Consumer Credit Counseling (ACCC) comes in.
Since 1991, ACCC has provided confidential consumer credit counseling for free. While there isn’t an ACCC office operating in Vermont, those with personal debt can contact the agency via telephone or the internet for help in getting their runaway finances under control.
According to ACCC’s estimate, the average Vermonter has $4,693 worth of credit card debt; this amount is well above the WalletHub figure reported last week.
“The Green Mountain State is a peaceful and serene location with picturesque mountains for winter sports. But with the lowest gross state product in the nation and (a) fairly small economy, Vermont residents often find themselves in need of debt solutions,” according to ACCC.