EDITORIAL: Room for improvement on Pa. consumers' credit debt

York Dispatch Editorial Board
FILE - This Nov. 29, 2018, file photo shows are credit card logos posted on a store's door in Philadelphia. Simplify your taxes and maximize your income with a separate credit card for your side hustle. In addition to keeping all your business expenses in one place, it could help you with credit to build your business and rewards to extend your budget. (AP Photo/Matt Rourke, File)

If the nation’s personal credit card debt were plotted as a bell curve, Pennsylvania would be at the very top of the roller coaster.

The state lands smack-dab in the middle nationwide when it comes to average household credit card debt: number 25, according to a study by the website 24/7 Wall St.

That may not sound like cause for concern but consider this: that still amounts to more than $6,000 owed to Visa, MasterCard and various other credit card companies by the average Pennsylvania household.

In other words, there’s room for improvement.

Of course, there are a variety of variables at play. Owing $6,000 on credit cards is not as pressing for six-figure earners as it would be for those making the minimum wage (especially the minimum in this state!).

And credit experts say that what they call a “credit utilization rate” of under 30 percent will not harm one’s credit rating. At $6,000, someone with a total line of credit topping $20,000 would be within the limit.

Still, there are reasons not to be too cavalier about credit card debt.

For one, it eats into a family’s cash flow. Credit cards are among the highest-interest loans a private consumer assumes. And that interest can be steep — especially if only the minimum amount is paid back each month. Take it from the experts at credit.com:

“Let’s assume, for example, you owe $6,000 on a credit card with a 15 percent annual percentage rate (APR) and your issuer requires 2 percent of that balance as a minimum payment. You’d wind up paying close to around $9,184 in interest, were you to only make that $120 minimum for the full 355 months it would take to pay that $6,000 balance down.”

And that’s without any additional credit card expenditures.

Then, too, for many families, credit cards are not the only long-term debt on the ledger sheet.

Mortgages, car loans and the grand-daddy of them all these days, student loans, weigh down the “debit” side of the balance sheet.

Indeed, at more than $1.5 trillion nationwide, student-loan debt has now surpassed credit cards and is behind only mortgages as the top source of debt in America.

This accumulated debt accounts for what is, at bottom, the real problem: “Research shows most Americans are ill-prepared to face a minor financial hiccup, let alone the cost of retirement,” according to a recent story by the Associated Press.

Pennsylvanians aren’t immune from these trends. The National Institute on Retirement Security estimates that half of all households in Pennsylvania have nothing saved for retirement and more than three-quarters of all Americans have insufficient retirement savings.

So, again, there’s room for improvement.

Credit cards have their place and, indeed, are all but indispensable in a world were financial transactions take place online, over smartphones and through screens.

But the interest rates are high and the debt can pile up quickly. In households were retirement savings are scarce and credit cards account for only a portion of the total debt, the old axiom has never been more pertinent: buyer beware.