Understanding the Surge in Credit Card Balances Across the U.S.

In the past year, credit card spending has seen a significant uptick, as evidenced by data from Experian. By the end of June 2023, the average credit card balance nationwide had risen to $6,365, marking an 11.7% increase from $5,699 in June 2022. This trend is consistent across all metropolitan areas in the U.S., although some cities have experienced more dramatic increases than others. In this blog, we will delve into the details of these changes, focusing on the cities with the highest and lowest percentage increases in credit card balances.

West Coast Cities Lead in Credit Card Balance Increases

The most significant jumps in credit card balances—those exceeding 15.4%—were predominantly observed in cities along the West Coast. This trend spans several states in the Western U.S., with a notable concentration in California. A belt of cities with rapidly growing balances stretches from El Centro near California’s southern border, through the Central Valley to Fresno, Modesto, and Stockton, and further north to cities in Oregon and Washington, reaching all the way to the Canadian border.

Metro Areas with the Highest Percentage Increases in Credit Card Balances

While not all the cities experiencing these sharp increases are large metropolitan areas, some major cities like Las Vegas, Phoenix, and Portland, Oregon, are included. For instance, the Bend, Oregon metro area, with a population of just over 200,000 in 2022, also saw a significant rise in credit card balances.

Modest Increases in Credit Card Balances in the Midwest and South

Conversely, some cities have seen only modest increases in credit card balances, all less than 8% since mid-2022. These metros are generally smaller cities scattered throughout the Midwest and the South.

Lowest Percentage Increases in Credit Card Balances

Among these 25 metros, the average credit card balance growth ranged from a modest 4.9% increase in Casper, Wyoming, to a still relatively low 8% in Blacksburg, Virginia.

Factors Driving the Increase in the Western U.S.

So, what is driving these increases in the Western U.S.? Is it a case of residents near the Pacific going on a YOLO spending spree? More likely, it is due to inflation and the rising costs of various big-ticket items. While costs such as rent, vehicle purchases and upkeep, and insurance premiums have affected most U.S. consumers in the past couple of years, they are likely even more pronounced in California, which is facing a perfect storm of household expense hikes.

A non-exhaustive list of challenges Californians are experiencing includes:

• Some home and auto insurers no longer writing policies in the state, or if they do, sharply increasing premiums.
• Smaller cities seeing an influx of new residents moving away from more expensive metros like Los Angeles and San Francisco, driving up rental and moving costs.
• Recent layoffs in the tech sector, disrupting income flows for many once highly compensated workers.

Any of these factors could cause consumers to rely on credit cards more than they may have in the past.

Consumers Are Bending, Not Breaking

Fortunately, according to Experian data, consumers appear to be bending more than breaking. Only five of the 25 metros with the highest increases in credit card balances saw a decline in their average FICO® Scores over the past year, and even then, it was only a one-point loss. More broadly, average credit utilization has ticked up by just 1 percentage point over the past year, from 27% to 28%—not drastic, but lower is always better.

Conclusion

The rise in credit card balances across the U.S. is a complex issue influenced by various economic factors, particularly in the Western states. While some cities have seen dramatic increases, others have experienced more modest growth. Understanding these trends can help consumers make informed decisions about their financial health.

If you are looking for expert advice on managing your finances or need assistance with mortgage services, O1ne Mortgage is here to help. Call us at 213-732-3074 for any mortgage service needs. Our team of professionals is dedicated to providing you with the best solutions tailored to your unique financial situation.

Stay informed, stay prepared, and let O1ne Mortgage guide you through your financial journey.