Bentonville, Russellville rank among best and least for sustainable consumer debt

A new report from WalletHub estimates U.S. consumers likely racked up an additional $80 billion in credit card debt at the end of 2016, putting outstanding balances dangerously close to the record levels seen during the Great Recession.

While some consumers likely made resolutions to whittle down their credit card debt, it will take take an average of 44 months to pay off the average credit card debt among Arkansas consumers ($5,200) making the minimum $156 monthly payment. The added interest cost totals $1,425, based on the WalletHub payment calculator.

Paying off the debt also means nothing else is charged on the cards between now and August 2020, which is how long it would take Arkansas consumers to retire their average credit card debt.

Talk Business & Politics pulled the credit card stats on 13 Arkansas cities which are ranked in percentiles from 1 to 99 with the lower number indicating the most sustainable credit card balances based on average incomes, while the higher the number is the least sustainable credit card balances for consumers in those cities.

Bentonville ranked among the top of the report being in the 14th percentile. It was the highest ranking city in the state in terms of sustainable consumer credit card debt. Other cities across the country that also ranked in the 14th percentile include: Mission Viejo, Calif., and Gaithersburg, Md.

Benton earned the next highest ranking being in the 39th percentile. Benton was in the company of Florence, S.C., and Tacoma, Wash. Several of the Arkansas cities ranked around the middle of pack with Rogers in the 41st percentile, North Little Rock in the 49th percentile while Pine Bluff and Springdale fell in the 53rd and 55th percentiles, respectively.

Closer to the bottom of the pile with less sustainable credit card debt was Little Rock in the 71st percentile, Jonesboro in the 81st percentile and Fort Smith and Conway in the 84th and 85th percentiles, respectively. Fayetteville fell into the 92nd percentile while Searcy was in the 94th percentile alongside Wilmington, N.C., and Russellville was among the lowest ranked cities in the nation in the 99th percentile in the company of Stillwater, Okla., Lake Placid, Fla., and West Chester, Penn.

Average Consumer Credit Card Debt (ranked most-to-least sustainable based on incomes)
Bentonville: $6,148
Benton: $5,630
Rogers: $5,416
North Little Rock: $5,079
Pine Bluff: $4,426
Springdale: $4,897
Little Rock: $6,520
Conway: $5,883
Jonesboro: $5,315
Fort Smith: $5,319
Fayetteville: $6,030
Searcy: $5,312
Russellville: $5,791

Benjamin Keys, assistant professor at the University of Chicago, said without accurate knowledge of outstanding balances it’s easier for consumers to overspend. Keys said some credit card debt is not a bad thing if incomes are rising. He said even then, charging items to pay for later is not likely the cheapest option.

He said too many times households accrue credit card debt because their incomes haven’t lived up to their spending habits. Then there is a disconnect between when a purchase is made and when it should be paid for which is the biggest challenge in managing credit cards. Keys said putting off repayment of debt is what has significant interest costs. There’s no cost to repaying your balance in full each month, if anything that builds your credit and can lead to cash back or rewards.

“In my view, understanding individuals’ self-control problems is crucial to understanding indebtedness. Because the line of credit on a credit card is so easily accessible, at stores or on the internet, individuals with self-control problems would be more tempted than ever to buy things that they don’t necessarily need or would later regret buying,” Keys said.

WalletHub asked several financial experts to weigh in on the impact rising credit card debt can have on the overall economy. Roderic Hewlett, Dean of the College of Business at Bellevue University, said credit card debt will boost current consumption (GDP) at the expense of future consumption.

“That is why the government bubbles the economy through easy credit to improve current GDP. The problem is the bubble and debt-income ratio creates the next recession,” Hewlett said.

Several financial gurus polled by WalletHub agreed that spending is good for the economy so long as there is growth in GDP and personal incomes at the same time. But when spending continues and there is lack of income growth and the economy begins to shrink that’s where the trouble lies in another likely recession. Debt levels are rising but none of the economists polled by WalletHub see a recession in sight.

John Longo, attorney for Citadel Consulting Litigation, sees high credit card debt hurt consumers at the low end of the social economic end of the economy.

“On a macro level, it might be good. But on the micro level I deal with, it sucks too much money out of people who can least afford it. By that I mean people who live pretty close to paycheck to paycheck,” Longo said.

Jay Benson, global economist with Wells Fargo Securities said Tuesday (Jan. 18) in a webcast that he expects modest 2% to 2.5% economic growth in the U.S. this year with some volatility in the quarters. He looks for two interest rate hikes by the Federal Reserve, the first coming in June and another one in the back half of the year. He expects unemployment will come down further and inflation to pick up steam which will likely mean three rate hikes in 2018.

Credit professionals warn rising interest rates are a risk to consumers with debt as is inflation which means higher prices for goods and services.