Not only are Americans racking up credit card debt at an alarming rate, but we’re also in denial about how much we owe. When people are asked about the total balance on their credit cards, their estimates are 37% percent lower than the amounts reported by lenders, according to research by the Federal Reserve Bank of New York.
Whether they know exactly how much they owe (and how much they’ll end up paying over time on their debt), some Americans fear they’ll be shackled to debt for the rest of their lives. Twelve percent of people surveyed by CreditCards.com in 2016 said they feared they would die in debt.
Based on data from WalletHub, they have reason to be concerned. The website recently put together a list of the average credit card balances in nearly 2,500 U.S. cities, based on data from credit reporting agency TransUnion. Using median income data for each city, they also determined how long it would take the average resident to pay off their debt and how much they would pay in interest (assuming an average interest rate of 14%).
In many cities, payoff times could take a decade or more. CardHub determined it would take 16 years for people in West Chester, Pennsylvania, to pay off their average debt of $6,926. Over that period, they’d fork over nearly double their initial balance – $10,535 – in interest. People in Marquette, Michigan; Laramie, Wyoming; and Stillwater, Oklahoma, were also looking at payoff periods of more than 10 years.
Folks in those cities may be looking at some of the longest debt payoff times, but they aren’t the ones who’ve rung up the largest balances on their credit cards. That dubious honor goes to people living in Darien, Connecticut, one of the wealthiest communities in America. Other heavily indebted cities were similarly posh, including Southlake, Texas, where roughly 70% of people earn more than $100,000 a year, according to NerdWallet, and Lake Forest, Illinois, where more than half of residents take home at least $150,000.
Based on WalletHub’s data, here are the 10 cities in the United States with the most credit card debt.
10. Manhattan Beach, California
- Total debt: $10,734
- Cost to pay off debt: $1,922
- Time to pay off: 2 years, 4 months
9. Parkland, Florida
- Total debt: $10,748
- Cost to pay off debt: $3,000
- Time to pay off: 3 years, 7 months
8. Scarsdale, New York
- Total debt: $10,771
- Cost to pay off debt: $1,513
- Time to pay off: 1 year, 10 months
7. Lake Forest, Illinois
- Total debt: $11,011
- Cost to pay off debt: $2,998
- Time to pay off: 3 years, 6 months
6. Calabasas, California
- Total debt: $11,033
- Cost to pay off debt: $3,846
- Time to pay off: 4 years, 5 months
5. Westport, Connecticut
- Total debt: $11,921
- Cost to pay off debt: $2,923
- Time to pay off: 3 years, 2 months
4. Southlake, Texas
- Total debt: $12,644
- Cost to pay off debt: $2,512
- Time to pay off: 2 years, 7 months
3. Greenwich, Connecticut
- Total debt: $12,776
- Cost to pay off debt: $6,313
- Time to pay off: 6 years, 1 month
2. Beverly Hills, California
- Total debt: $13,729
- Cost to pay off debt: $5,971
- Time to pay off: 5 years, 5 months
1. Darien, Connecticut
- Total debt: $13,817
- Cost to pay off debt: $3,668
- Time to pay off: 3 years, 5 months
Why do the rich have so much credit card debt?
Why are the relatively wealthy finding themselves stuck with five-figure credit card debt? A desire to keep up with the Joneses may be to blame.
“[S]tudies have showed that our perception of what we ‘need’ or desire is relative; if people around us have more disposable income we may borrow to keep up,” Catherine Lau, an assistant professor of accounting, finance, and economics at Carthage College, told WalletHub. After all, who wants to be the one driving a Toyota in a neighborhood full of Audis and BMWs?
Unfortunately, getting into credit card debt is easier than getting out of it. Once you’ve found yourself in debt, creating a plan to erase your obligation is essential, perhaps by cutting spending, taking on a second job in order to afford higher payments, or even negotiating with your lender. But you also need to change the way you think about money, say experts, which is the really hard part. Sticking to a budget is essential, as is realizing the true cost of buying something on credit and not paying it off right away.
Not only do people spend about 30% more when they use a credit card than if they were paying with cash, they often ignore how much they’ll pay in interest over time, since they think of those fees as an expense which will occur in the distant rather than near future, Paul R. Woodburne, associate professor of economics at Clarion University of Pennsylvania, told WalletHub.
“People often are guilty of thinking of the monthly payment (‘I can afford $20 a month for the couch on my department store card’), as opposed to thinking of the real cost … or the real limits of their income,” he explained.
Estimating the real long-term cost of purchase may be difficult, but it’s essential to managing credit wisely. Otherwise, a $50 dinner you put on your card could end up costing you $500 in the long run.