Wilmington NC Has Highest Credit Card Debt to Income Ratio in the Nation

According to the Equifax credit reporting agency, Wilmington NC residents owe the highest percentage of their income to credit card issuers than any other major metropolitan area in the country. Households in the port city owe an average of $7,315 on plastic while earning a median income of $42,392.
Most consumer experts advise spending no more than 25% of your income on housing. In Wilmington, these folks owe 17.26% of their income just on credit cards.

Contributing Factors

The makeup of the city’s residents may provide some insight on their reliance on credit cards. Many residents would fit the classification of “relocated yankees”, having sold homes in the north and bought a new home in Wilmington for somewhat of a bargain. That should serve to reduce the average.

Also, Wilmington is a college town. UNCW enrolls roughly 12,000 full-time students. This is substantial, since the total population is just over 100,000. We know students love credit cards. Sallie Mae reported an average mean credit card debt owed to be $3,173, or a median owed of $1,645. This also would suggest that the city’s student population would be a mitigating factor rather than a reason for the high average. However, using Sallie Mae’s 2009 data, you must also consider that college seniors graduated with over $4,100 in credit card debt.

In many college towns, most students leave when they graduate whether they find a job or not. That’s not the case in Wilmington. As a resort town, Wilmington happens to be a pretty good place to live. Therein lies the problem for those who are trying to keep up with the big whigs that have money to spend. College students who graduated with debt continue to rely on credit cards as they keep up with the twentysomething lifestyle, often working service industry jobs as a way to pay the rent. Rather than paying off their balances as they expected they could do with their new jobs, they are finding that they need to use the cards for basic living expenses or to pay bar tabs. As a result, their balances continue to increase. Keep in mind that most cities this size have only one entertainment district. Wilmington actually has three, located near the college, on the riverfront and at nearby Wrightsville Beach.

Much of Wilmington’s working class indeed fills two dominant job classifications. Either you are working in a service industry job or you are in sales. Both job types were hit hard by the recession that resulted in fewer meals out and fewer companies making capital purchases.

The other major population group in Wilmington are its retirees. If they were relying on dwindling returns from their investments, then many likewise may have used credit cards as a stopgap in their budgets. That might work for a few months, but over a couple of years it can lead to some pretty high balances.

What Could Be Wrong With the Study

The study by Equifax is not perfect. It excluded households that had fewer than two credit cards. A higher number of cards usually correlates to a higher total balance. This exclusion would hold true to all U.S. cities, but it would especially exclude a higher number of lower balance cardholders in college towns.

The study makes no distinction on whether the amounts owed were carried over each month or if the cards were paid in full every month. However, it is unlikely that this would substantially impact the results from one city over another.

In “Good” Company

Unfortunately for North Carolina, Wilmington is not alone. Asheville ranked sixth nationally in percentage of income owed on credit cards, Fayetteville nineth and Winston-Salem tenth. At fifteenth and eighteenth respectively, Hickory and Greensboro rounded out the top twenty. Since a state’s financial health ultimately depends on the financial health of its citizens, North Carolina could be in store for future troubles unless it can take steps now to fix the problem.

Top 20 Metropolitan U.S. Cities for Highest Percentage of Income Owed to Credit Card Debt

Rank Metropolitan Area Median Income Credit Card Debt Outstanding Plastic to Income Ratio
1 Wilmington, NC $42,392 $7,315 17.26%
2 Canton/Massillon, OH $40,912 $7,050 17.23%
3 Toledo, OH $44,349 $7,414 16.72%
4 Duluth, MN $38,392 $6,418 16.72%
5 El Paso, TX $33,126 $5,349 16.15%
6 Asheville, NC $39,884 $6,431 16.12%
7 Pensacola, FL $42,106 $6,649 16.79%
8 Youngstown, OH $39,304 $6,142 15.63%
9 Fayetteville, NC $42,506 $6,519 15.34%
10 Winston-Salem, NC $42,869 $6,505 15.17%
11 Gainesville, FL $38,572 $5,817 15.08%
12 Spokane, WA $42,191 $6,351 15.05%
13 Tampa, FL $42,354 $6,373 15.05%
14 Bremerton, WA $54,417 $7,916 14.55%
15 Hickory, NC $37,623 $5,416 14.39%
16 Sarasota, FL $45,000 $6,429 14.29%
17 Cleveland, OH $47,186 $6,729 14.26%
18 Greensboro, NC $41,080 $5,771 14.05%
19 San Antonio, TX $44,113 $6,167 13.98%
20 Knoxville, TN $37,269 $5,178 13.89%

Worst States for Credit Card Debt as Percentage of Income

State Outstanding Credit Card Debt Balances
FL $47,568,265,541
NC $22,386,064,118
OH $28,985,502,668
TX $48,833,824,544
WA $18,288,819,367
CA $90,566,978,302

Needless to say, we all have a lot to do. Interestingly, total credit card debt outstanding has dropped each year from 2008 to 2010. That does not mean that Americans are paying off debt. In all actuality, we are still increasing our balances on average. The sobering truth is that the staggering reduction in debt balances is attributed to massive defaults on credit cards, with some card issuers having experienced default rates higher than 10% (Advanta reported default rates of 15.86% just three months prior to shutting down their credit card program altogether.).

North Carolina credit counseling agencies have indeed seen their share of heavy volume of debtors seeking help. Triangle Family Services, Vision Credit Education and Alliance Credit Counseling have all reported much higher numbers of clients since the recession first began. For those that contact them early enough, much can be done to prevent further damage to their credit. For others, they will likely end up with an inevitable meeting with their local bankruptcy attorney.


Sources:
Equifax
Sallie Mae, “How Undergraduate Students Use Credit Cards,” April 2009.
Vision Credit Education, Inc.

Kenneth Long
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Kenneth Long

President at Debtors Unite
Kenneth Long is President of Debtors Unite, Inc. as well as President and Vice Chairman for Vision Credit Education, Inc. He served as a regional coordinator for the North Carolina Saves campaign. Long co-founded the Wake EITC Coalition along with Family Resource Center of Raleigh.

Long is a graduate of the University of North Carolina at Chapel Hill with a B.A. in Industrial Relations. He subsequently received his Certificate in Nonprofit Management from Duke University. His Certificate in Financial Planning was issued by Florida State University.

Long has achieved the Accredited Credit Counselor and Accredited Financial Counselor certifications through the Association for Financial Counseling, Planning and Education. Long originally achieved the Certified Credit Counselor designation through the National Institute for Financial Education.

In addition to years of nonprofit leadership, Long has been an innovator in the field of volunteer tax return preparation programs. He assists volunteer associations and nonprofit organizations who seek to integrate credit counseling and asset-building programs with free personal income tax preparation. His approach to using free credit reports as both an incentive and a screening tool for placement into asset-building programs has been shared with members of the National Community Tax Coalition, the EITC-Carolinas Initiative of MDC, Inc. and nonprofit groups across the Carolinas.

Long assists members of our armed forces in the Carolinas, Iowa, Rhode Island, Georgia and Germany with financial readiness. Please support our Soldiers, Marines, Airmen and Sailors!

Favorite quote:

"The democracy will cease to exist when you take away from those who are willing to work and give to those who would not."

Thomas Jefferson
Kenneth Long
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