Ohioans are carrying more credit card debt and delinquencies are up

Credit card delinquency increased more in Ohio than in all but nine other U.S. states, says a new report from WalletHub, a personal finance company.

Consumers can end up in credit card debt because of unexpected life events and economic “shocks” like job losses, medical emergencies, divorce, wage reductions and emergency home or auto repairs, said Stephanie Moulton, professor of public policy and the associate dean for faculty and research at the John Glenn College of Public Affairs at The Ohio State.

It’s hard to tell how many Ohioans are racking up credit card debt to pay for basic necessities or emergencies, versus card holders who are splurging on travel, entertainment and big ticket items like electronics and furniture.

But either way, falling behind on credit card bills can be costly, financially damaging and emotionally draining.

“You are starting to see signs of increased distress with delinquency rates creeping up again,” Moulton said. “Absolutely credit card debt can cause significant stress.”

Credit card use

Roughly eight in 10 U.S. adults have a credit card, and slightly less than half card holders carried a balance at least once in the past year, says a report released year by the Federal Reserve.

Credit cards offer all kinds of perks, such as cash back, airline miles or travel rewards and 0% introductory APR.

But in general credit cards tend to have much higher borrowing costs than other financial tools, with interest rates averaging above 20%, says Bankrate.

About one in four credit cards in Ohio were delinquent in the third quarter of 2024, according to WalletHub’s new analysis of “proprietary user data.”

About 30 U.S. states had higher credit card delinquency rates. But Ohio saw the 10th largest increase in delinquency rates between Q3 of 2023 and Q3 of 2024, WalletHub said.

Mississippi had the highest share of delinquent cards (52%), followed by Louisiana (45%) and Alabama (42%). Iowa’s delinquency rate was the lowest, at 18%.

WalletHub says its estimates reflect the share of credit card accounts that are at least 30 days past due in all U.S. states.

These state-level estimates are much higher than national delinquency rates reported by the Federal Reserve Economic Data, which is an online database that measures total credit card loan balances.

Ohio’s significant rise in credit card delinquencies is tied to a combination of economic challenges, said Chip Lupo, an analyst and writer for WalletHub.

“The state’s job market, ranked 31st, isn’t offering enough opportunities and Ohio’s economy ranks low overall,” he said. “On top of that, credit card debt has been climbing, while the state is experiencing one of the largest increases in household debt.”

Balances

Average credit card debt in Ohio increased to about $6,300 in the third quarter of 2024, up from about $4,655 during the same period in 2023 (+35%), says data published this month by Lending Tree, an online financial marketplace.

All but one state saw average credit card balances increase during that time frame, though Ohio’s increase was lower than the national average.

Credit: AP

Credit: AP

Connecticut had the largest average credit card balance ($9,325), while Mississippi had the smallest ($4,120).

Ohio ranked 39th in the nation when it came to average credit card debt.

Lupo said credit card delinquencies are important because they can have a lasting impact on consumers’ financial health.

“When a payment is 30 days late, it’s reported to credit bureaus, which can significantly lower their credit score,” he said. “A lower credit score makes it harder to qualify for loans, secure favorable interest rates or even rent a home.”

Concerns

Moulton, the professor and associate dean at the John Glenn College of Public Affairs, said credit cards can be a smart payment method, like when consumers lock in a 0% interest rate for an introductory period of time.

Ohioans can break up the costs of big-ticket items or emergency expenses into smaller, more manageable payments and still be in good shape as long as they pay their minimum payments on time and have a plan to greatly reduce or erase the balance before it starts accruing significant interest.

Moulton, however, said, “using credit cards as a way to spend outside your means is a really risky strategy.”

She said there are generally cheaper ways to borrow, like home equity loans, though she pointed out that not everyone has access to these financial tools.

Credit: AP

Credit: AP

Moulton said credit cards can have lower interest rates than other financial products like payday loans and spot loans, which sometimes also carry heavy fees.

“Is it more or less expensive? That really depends how they are using the credit card debt, what the interest rate is on that credit card and are they going to pay it off or revolve it month over month,” she said.

Rachel Dwyer, a sociology professor at the Ohio State University, said going into credit card debt might be worth it to some people if it means they can keep up with the rent or mortgage payments and ensure their power and water service remain on and they can put food on the table.

“People are making these decisions within very constrained and complicated circumstances,” Dwyer said. “Many of the circumstances that people find themselves in are due to very large factors that they don’t control.”

Moulton said nonprofit credit counseling agencies can help people manage their debt and figure out potential repayment options, though not everyone will qualify for repayment plans or other services.

Credit counseling agencies also may offer financial advice and education and provide budget strategies.

Consumers should know that some for-profit “debt relief,” “debt consolidation” and “debt settlement” companies charge steep fees and some have been accused of predatory practices.

Dwyer said consumers with credit card debt should talk with their lenders. She said ignoring their calls and messages and cutting off communication is a mistake.

“If the debt gets charged off and sold to a debt collector, you’re actually working with a much more difficult party than if you had contacted your lender,” she said. “There may be programs that the lending institution has and sometimes they’ll say, ‘If the consumer calls us we’ll give them the same thing as if they worked with a nonprofit.’”

Good to know:

The only way to avoid carrying a balance on a credit card is to pay the card off in full every month.