Loudon dwellers have low debt load

Loudon County ranks 10th out of Tennessee’s 95 counties on an aggregate measure of credit card debt, according to New York City-based financial tech company SmartAsset.

SmartAsset’s second annual study on credit card debt nationwide, broken down to county level, found that Loudon County residents have $2,491 in per capita credit card debt, which is 8.8 percent of average income and 6.1 percent of individual wealth.

The ratio of debt to income is particularly important according to Steve Sabato, senior PR associate for SmartAsset.

“This number can serve as insight into whether people will be able to pay off that debt,” he said in an announcement. Similarly, the ratio of debt to average individual wealth gives clues to an area’s overall financial stability.

No other nearby county ranked nearly so well. Knox County is 42nd in the state, with $2,523 per capita in credit card debt, which is 8.9 percent of individual income and 10.7 percent of wealth.

The national average is $2,319 in debt, 9.5 percent of income, and 10.5 percent of wealth, according to SmartAsset’s compilation. The Tennessee average is $1,977 in debt, 9.2 percent of income, and 11.3 percent of wealth.

SmartAsset’s figures are based on U.S. Census Bureau data from 2014, ESRI mapping software, and the Federal Reserve Bank of New York, according to the news release.

It’s important for people to keep their card balances low, according to Ann Berry, a professor/family economics specialist at the UT Institute of Agriculture’s Department of Family and Consumer Sciences.

“Ideally, if you use it, you pay it in full every month and you don’t get that interest charged,” she said.

But one in three adults says their household carries credit card debt month to month, Berry said.

Credit card spending – and resulting new debt – dropped significantly following federal consumer protection legislation in 2009. But it has increased again, slowly, since then.

“With the Federal Reserve raising interest rates last year and predicted to again this year, cost of credit will rise,” Berry said via email.

SmartAsset lists several strategies for paying down card debt. The “Snowball Method” is to pay off the card with the lowest balance first, then adding that amount to help pay the next. The “Avalanche Method” is paying off the card with the highest interest rate first, even if that’s a larger debt. Another possibility is borrowing new money to pay off old debt – but that only helps if you can get a new loan at lower interest than your current payments.

Debtors who seek help from a credit counselor should try to find a nonprofit agency. For-profit debt management companies advertised heavily several years ago, and charged stiff up-front fees before doing anything about the original debt, Berry said.

Many consumers try to get out of debt on their own, or seek help from family and friends; but in looking for a professional counselor, they should check with the Better Business Bureau to find a reputable nonprofit, she said.

Berry agreed the repayment strategies offered by SmartAsset could be useful. But they’re secondary to the real problem, she said.

“First and foremost is to quit using the credit cards. Cut them up, put them away,” Berry said. “Everyone in the household needs to be on board with that.”

Some people don’t use credit cards at all, and Loudon County’s healthy ranking could result from an unusual concentration of such abstainers, she said.

Credit cards shouldn’t be used for everyday expenses, because it’s easy to lose track of a burgeoning balance, Berry said. Cardholders should figure how much debt they can fully pay off each month, and stick to that limit.

Many people have to use credit cards for unexpected necessary expenses because they don’t have an emergency fund, she said. When people budget their monthly debt payments, they should also set aside some savings – even if it’s only a little – to build up an emergency fund. That can eventually save them from resorting to credit cards at all, Berry said.