by Liz Lizama
Residents of Falls Church ranked most fiscally responsible with their plastic in Virginia and 13 in the nation, according to a new SmartAsset study that measured credit card debt against income and wealth.
With an average income of $59,088 and wealth at $58,462, Falls Church residents racked $3,670 in credit card debt on average.
Those numbers yielded a 6.2 percent credit card debt to income ratio and 6.3 percent of wealth. Falls Church scored a 96.38 overall credit card debt index, a weighted average of those two indices.
AJ Smith, managing editor of SmartAsset, said while Falls Church income is high, the second city on the list earned an average income of $28,000 compared to Falls Church’s $59,000. “Residents in both counties did a good job managing debt, regardless of income,” she said.
“Fairfax County ranked number five in the state and 79 in the nation despite higher average wealth,” she said, noting that income and wealth did not necessarily demonstrate lower credit card debt in some instances.
The study aimed to serve as a reference point for consumers to evaluate credit card usage. “Your own personal finance situation will depend on what works for you, but this can serve as a jumping off point to get the conversation started,” said Smith.
“Some people may look at the average credit card debt of Falls Church and say, ‘Oh my gosh, I wouldn’t be able to sleep at night if I had that much credit card debt.’ Others will say, ‘I’d be okay if I had twice as much credit debt.’”
Local Ameriprise financial advisor Rebecca Hall said, “It is difficult to generalize what it ‘too much’ debt, since it differs by individual based on income. In general, I think a good rule of thumb is to have no more than 30 percent of your available credit used at any time.”
Hall said the best strategy to pay down debt is to choose one card (usually the highest interest rate or lowest balance) and make extra payments only to that account while paying just the minimum payment on all other debts.
When that first card is paid in full, she said consumers should then choose another account and take the monthly payment amount initially put towards the first account and add that towards the minimum monthly payment due on the next card. Again, Hall recommended paying only the minimum on all other accounts while focusing on aggressively paying off one card.
“If you continue to do this, you will see that this results in much faster debt reduction, plus you will have the satisfaction of seeing some balances paid in full,” she said.
But before consumers even accrue credit card debt, Hall said the best way to manage credit card debt is to establish a sufficient cash reserve in order to avoid using credit cards as an emergency fund.
“Living within your means and having an adequate cash reserve will reduce the likelihood that credit is used to cover everyday or unexpected expenses,” she said.