Residents of California and Hawaii are the most indebted individuals in America, but they're also among a group that are making the most progress in paying down the amount they owe, according to a MoneyWatch analysis of state-by-state debt statistics.
Overall, debt — and particularly credit card debt — is dropping appreciably as the country is swept by two complimentary trends: a new commitment to fiscal responsibility and lending restrictions that are generally keeping credit out of the hands of people who aren't committed to using debt responsibly.
"There is clearly a segment of the population that can't borrow," says Kenneth Lin, president of Credit Karma, which provided the data. "But there is also a segment of the population that is just cutting back, paying down their debts and pulling out the credit cards less often."
Credit Karma's debt data, based on the actual debt obligations held by some 200,000 consumers who use the company's site, breaks down the average amounts that residents in each state borrow via credit cards, mortgages, auto and student loans.
Over the past year, the American consumer's propensity to pay down debts has been relatively remarkable, with residents of 44 states cutting the total amount owed on credit cards, auto loans and mortgages. The only type of debt that's increased more or less universally over the past year is student loans, Lin notes. He considers that a troubling sign, potentially signalling a student debt bubble that could be far more difficult to pop than the housing debt bubble of 2008. (Related Debt in America story: Students Buried in Education Loans, coming soon.)
Student loans aside, there are only six states where residents have either increased or made no progress in paying down their debts. Those states — Montana, Wisconsin, Iowa and Louisiana, North Dakota and Minnesota, — didn't suffer as much from declining home prices, Lin says. (Of course, they didn't participate in as much of the upside of real estate's boom years, either.)
On the other hand, in states where housing prices have suffered with double-digit declines are also where consumers are making the biggest dent in what they owe.
"When you're in a market where housing prices have fallen 30 or 40%, you feel poorer and you're going pull out your credit card a lot less," Lin explains. Besides, you're less likely to have enough home equity to secure a big loan with real estate.
Where are America's most and least indebted consumers, according to Credit Karma's data? And how much progress (if any) have they made in paying off debts during the past year?
10 Most Indebted States (averages exclude student loans)
State...........................Average debt............% change
1. California...............$336,169.....................-4%
2. Hawaii....................$321,258....................-7%
3. Maryland................$263,524.....................-0%
4. New Jersey.............$257,462.....................-1%
5. Washington...........$243,758.....................-2%
6. Massachusetts......$242,111.....................-0%
7. Virginia.................$239,186....................-1%
8. Connecticut..........$229,684.....................-3%
9. Colorado...............$219,899....................-1%
10. Nevada................$218,010....................-7%
10 Least Indebted States (averages, excluding student debt)
1. Oklahoma............$126,027...................-3%
2. West Virginia.......$127,535...................-1%
3. Arkansas.............$128,460...................-0%
4. Mississippi..........$129,792..................-2%
5. Indiana................$132,618..................-3%
6. Kansas................$133,606..................-2%
7. North Dakota......$133,823..................+0%
8. Kentucky.............$136,441.................-1%
9. Iowa....................$139,415.................+0%
10. Nebraska..........$139,527..................-1%
(States that show a 0% registered at less than one percent change. The positive and negative signs show the direction the incremental change, however. For instance, overall debt dropped in Arkansas by $79 from July 2010 to July 2011, going from $128,539 to $128,460, according to Credit Karma. On the other hand, North Dakotan's added $406 to their debt burdens, with the amount they owe on credit cards, mortgages and auto loans rising to $133,823 from $133,417.)
States with the biggest debt declines
1. Hawaii...............$321,258..............-7%
2. Nevada..............$218,010.............-7%
3. Florida...............$185,518.............-6%
4. Utah..................$200,878.............-5%
5. California..........$336,169.............-4%
6. Alaska..............$211,970.............-4%
7. New York.........$201,838............-4%
8. Michigan..........$144,143............-4%
9. Missouri...........$142,174............-4%
10. Connecticut....$229,684...........-3%
This article is part of a series related to being Financially Fit
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