The level of personal debt in major cities and what it "means"

In the "useless" news category, there was a recent report by the information service Experian that compared the average personal debt of 20 major metropolitan statistical areas to the national average of personal debt of $25,927 (as of this past February)—which is about five percent higher than in 2010. In the top 10 of the list was Chicago, with an average personal debt of $26,429 while Seattle had the fourth highest personal debt, with an average of $27,279. Residents of New York and Los Angeles were in the lower half of the top-20, each with below the national average of personal debt.

Houston and Dallas are neck and neck for most personal debt-ridden, the former $28,105 while the latter just nudging ahead by $135 for the “top” spot. These two cities also had an average personal credit score of 648, below the national average of 665. However, this was not the lowest score of the 20 major metropolitan areas; that “prize” belonged to Atlanta, at 646—and all three falling within the “poor credit” category. On the other hand, Minneapolis had the highest average personal credit score of 702—the only one of the 20 MSAs to have a “good” average credit rating. 

Where was Detroit on this list? Whenever the city is mentioned, the common assumption is that it is a financial hellhole, due mainly to the long-term effects of white-flight, loss of tax revenue and an ever shrinking manufacturing base that once provided well-paying middle class jobs. Somewhat surprisingly, then, the report showed that it had the lowest personal debt of the 20, with an average of $23,604. It also actually had a higher than average personal credit score of 667. 

There are differing interpretations for these (relatively small) disparities. For example, Dallas’ unemployment rate of 5.4 percent is lower than the national average; thus its high personal debt could be seen as a “positive” result of an improving economy, greater consumer confidence and thus rising personal spending. 

On the other hand, while Detroit’s lower personal debt could be seen in a positive light—greater personal financial “accountability”—is may also be due to other factors, such as higher than average bankruptcies, high poverty rates, a higher than average unemployment rate (9.1 percent) and lower income levels which discourages spending or incurring debt. Detroit still has a very high personal debt to personal income ratio compared to other MSAs. 

It probably goes without saying that “average” personal debt means just that, and that people with higher incomes and equity can afford to hold higher debt, and do so compared to others. That does not mean, of course, that people of lower income levels who hold multiple credit cards—whose balances might not seem much by themselves—can accumulate rather considerable debt without them even realizing it. 

It is interesting to note, I suppose, that debt isn’t merely a “problem” of federal or state governments, and considering how many people are in this country, personal debt in total is just as enormous as the federal debt. Of course, as we saw during the last recession, who “pays” when average people default en masse on their debts has its own consequences.