Everything is bigger in Texas -- including the average time it takes to pay off a credit card debt. That is among the findings from a recent study by CreditCards.com. They compiled information from the 25 largest metropolitan areas and found that three Texas cities ranked among the top five for the longest time to pay off a credit card debt.
To identify the metro areas where credit card debts were increasing (and therefore where people were paying more in interest charges), CreditCards.com gathered data from Experian on average credit card balances and from the Census Bureau for median earnings in all the metro areas to be studied. The payoff time was calculated assuming that 15% of the median income was devoted to pay off credit card debt, as 15% is a benchmark often used by credit counselors to determine a reasonable ability to repay a debt.
In terms of the longest average payback time, San Antonio topped the list with a sixteen-month payback period, Dallas-Fort Worth came in tied for second with a fourteen-month payback period, and Houston was fifth with a thirteen-month payback period. The other cities in the top five were Miami-Fort Lauderdale and Atlanta, both with fourteen-month payback periods.
On the other end of the spectrum, the City (or Cities) by the Bay had the shortest average payback period of the metro areas in the study. The San Francisco-Oakland-San Jose area had a nine-month payback period, with Boston and Washington D.C. tied for second with a ten-month payback period.
The differential between the highest and lowest payback periods can be significant with respect to interest payments. In this case, residents of the Bay Area had average card balances of $4,393, a bit below the average debt load, but the median earnings were higher at $44,491. The interest costs accrued during a nine-month payback period was $227. Contrast that with San Antonio residents, who had a higher balance of $4,880 but much lower median earnings at $27,491. The resulting sixteen-month payback period racked up $448 in interest costs -- almost two times that of Bay Area residents.
Although it seems obvious, the study underscores how important income is in dealing with debt burdens. Aggregate debt burdens do not necessarily correlate to the jobless rate in an area, as the Texas economy is still relatively robust (even with plunging oil prices). Nor is the issue simply one of cost-of-living, since the Bay Area has one of the highest costs of living in the U.S. It is the ratio of average income to the average cost of living, probably overlaid with individual circumstances that increase the debt loads in certain areas.
For example, the San Antonio area has a large military presence. Military families have a tendency to take on greater levels of debt compared to the civilian population, with generally fewer assets and 7.1% greater unsecured debt than the U.S. average, according to the National Foundation for Credit Counseling (NFCC).
You can see all of the listings for yourself here. If you live in one of these metro areas, see how your area stacks up nationally, and how your family compares to the average within the area.
While this is useful information, it does not change the fundamental facts of staying out of excessive credit card debt. Whenever possible, do not charge any more than you can pay off at the end of the month. Follow that philosophy, and you will have no struggles with credit regardless of where you live.