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No major American city saw its credit card balances grow faster than Austin, Texas, in the past year, according to a new study from CompareCards.com.
The Texas capital saw its average credit card balance jump 12% from September 2017 to September 2018. That made Austin one of just three of the nation’s biggest cities to see double-digit growth in credit card balances. However, even though few cities saw that much growth, the vast majority of the ones we examined saw at least some growth.
CompareCards.com used user data from My LendingTree to compare the average credit card balance in the nation’s 50 largest metropolitan areas. (Click here to see full methodology.) Our data showed that credit card balances in those 50 cities grew an average of 3.6% from September 2017 to September 2018. That type of growth was to be expected, given that Federal Reserve data showed that Americans’ revolving credit balances grew 3.7% nationwide during the same period, climbing to a record $1.041 trillion.
- Austin led the nation, but 2 other cities saw double-digit growth and 2 others were close behind.
- The biggest average credit balance decrease was in Nashville, 1 of just 4 cities to fall more than 1% year over year.
- Of the top 50 U.S. metropolitan areas, 44 saw some increase, though many were small.
- Washington, D.C. had the highest average balances overall, while Indianapolis had the lowest.
What’s driving balances up?
It’s hardly surprising that so many cities saw their average credit card balances rise in the past year, given that we’ve seen Americans’ overall credit card balances grow nearly 4% during that time. That doesn’t make the news any less discouraging.
Austin, Texas — the city with the fastest-growing card debt — has seen years of rapid population and job growth, transforming the Texas capital into perhaps the most expensive big city in Texas. For example, reports showed that rents in Austin hit an all-time high of nearly $1,300 per month in June. Those high cost-of-living expenses, paired with the student loan debt issues that come with being the home of the University of Texas, one of the nation’s biggest colleges, mean that many Austinites may be leaning a little more heavily on credit cards these days.
Not all credit card balance increases are a sign of economic struggle, however. It can actually be quite the opposite. In good economic times, some Americans use credit cards as a short-term loan to bankroll investments such as a home remodel or a small business expansion. That’s a sign that the borrower feels confident in their financial situation. That is likely driving some credit card balances higher in tech hubs like Austin, San Francisco, San Jose, San Diego and Los Angeles.
Of course, not all cities saw increases. The four cities that saw the biggest decreases are all among the 15 smallest cities in our survey, including Oklahoma City; Hartford, Conn.; Salt Lake City, Utah; and the city with the biggest decrease, Nashville. Many residents of those cities are likely taking advantage of a combination of the current strong national economy and the relatively low costs of living to knock down some of their credit card balances — and that’s never a bad thing.
The bottom line: Make 2019 the year you commit to wiping out your credit card debt
The truth is that when you carry credit card debt during good economic times, it is likely that you aren’t putting enough money away for when things go bad. And things usually go bad, even if only for a while. When the next downturn comes, an awful lot of people are going to find that they’ve made a bad situation worse by not paying off that debt. Factor in the fact that credit card interest rates are at record highs and are only going to continue to climb, and the urgency just grows.
Here are a few moves you can make:
- Consolidate credit debt with a 0% intro APR balance transfer card: Fighting credit card debt by getting another credit card may seem counterintuitive, but used wisely, these cards can dramatically reduce the amount of interest you pay and shorten your payoff time. Just make sure that you understand the fees and other details associated with the card before you apply. Finally and most importantly, make sure that you don’t just see the new card and all that available credit as an excuse to run up more debt. Read our guide on consolidating debt with a balance transfer.
- Call your card issuer and ask for a lower interest rate: You’d be shocked how often this works. Nearly two-thirds of those who asked for a lower APR got one, according to a recent CompareCards.com survey, and the average reported reduction was 5.5 percentage points. That’s a really big deal. For example, if you have a $5,000 balance on a card with a 24% APR and pay $150 per month on the card, you’ll pay $3,322 in interest and take 56 months to pay off that card. Drop that APR by 5.5 percentage points to 18.5% and you’ll pay just $2,072 in interest and pay it off in 48 months. That’s a savings of $1,250 and eight months. And you don’t have to have perfect credit to have your request granted. Pick up the phone. It can’t hurt to ask.
- Make a budget (or revisit your old one): You can’t make a serious plan to tackle debt unless you know exactly how much money is coming in and going out of your household each month. If you’ve never made a budget, take time to create one. Write down everything you spend, and all of your income. It’ll allow you to determine whether you need to focus on reducing spending or increasing income – or most likely some of both. And if you have a budget but haven’t reviewed it in a while, do it. Budgets are living, breathing things. Those numbers that you came up with in 2016 or 2017 may no longer apply.
- Get your credit in shape: Poor credit costs you a fortune. It’s as simple as that. That’s why it’s so important to keep your credit score in good shape. One of the best moves you can make: checking your credit report. If you haven’t done it in a long time, do it today. Millions of Americans have errors on their credit reports that are artificially holding their scores down. Don’t let that be you. Check your report and make sure all of the accounts listed are actually yours and all of the negative information on it (if any) is actually legitimate. If something looks amiss, follow the credit bureau’s instructions on their website for how to report the error. It can make a difference.
CompareCards used a statistically relevant sampling of anonymized My LendingTree user data, comparing information from September 2017 with data from September 2018. (My LendingTree user credit information is provided by TransUnion.) The data includes only active, revolving bank cards with a balance. CompareCards also relied on Census Bureau data to determine the 50 largest metropolitan areas in the U.S.