Cities where Americans are under the most financial stress
LOS ANGELES - A recent report from the personal finance site WalletHub ranked which cities are populated with people experiencing the highest financial distress levels.
WalletHub ranked 100 large cities using a variety of metrics, including the average credit score, bankruptcy filings and the total number of people with accounts in distress.
The website also noted how often internet search terms like "debt" and "loans" were searched for.
According to the site, financial distress is defined "as having a credit account that is in forbearance or has its payments deferred, meaning the account holder is temporarily allowed to stop payments due to financial difficulties."
RELATED: Making $150K is considered 'lower middle class' in these high-cost US cities
"The search index is a good indicator of people who are struggling but maybe haven’t taken action to try to get out of debt just yet," said Cassandra Happe, a WalletHub analyst.
Why these cities' residents have the worst financial duress
According to the report, Chicago, Houston, and New York ranked in the top three cities with citizens with high financial burdens.
Chicago, which ranked number one on the list, had a 30% increase from last year in the share of people who had financial accounts in distress, WalletHub reports. According to the site, that means 30% more Chicago residents skipped payments because of some financial hardship in 2023.
Residents of the Windy City also reportedly Google searched terms like "debt" and "loans" the most out of any other city in the country.
In Houston, residents are reportedly declaring bankruptcy at a higher rate than people in most other cities with 31% non-business bankruptcy filings per capita in 2023 compared to 2022.
In New York, residents also reported increased non-business bankruptcy filings from 2022 to 2023. Residents of the "Big Apple" also reported searching for debt and loan-related terms on Google more than anywhere else in the country.
How other cities ranked in the top 10 for citizens struggling with financial distress:
4. Los Angeles: Residents of the City of Angels reported having poor credit scores.
5. Dallas: This city ranked high for its consistent rise in bankruptcy filings.
6. Las Vegas: Sin City made it in the top 10 for low credit scores and rising bankruptcy filings.
7. San Antonio, Texas: This city ranked high for its yearly rise in bankruptcy filings.
8. Atlanta: A high frequency of online searches about debt and loans put this city in the top 10.
9. Riverside, Calif.: This city also ranked high for how much citizens Googled debt and loan-related issues
10. Jacksonville, Fla.: Low credit scores and a high amount of searches on debt-related issues put this city at No. 10.
LINK: Read the full list of 100 cities here.
Financial stress is rising
For Americans who lacked savings prior to the pandemic, financial stress is rising. A combination of inflation, increased interest rates, and the end of pandemic-tied relief, such as the moratorium on student loan payments, has led to record credit card debt, experts said.
In the fourth quarter of 2023, Americans held $1.13 trillion on their credit cards, and aggregate household debt balances increased by $212 billion, a 1.2% rise, according to the latest data from the New York Federal Reserve.
Delinquencies are also on the rise. As of December 2023, 3.1% of outstanding debt was in some stage of delinquency, up by 0.1 percentage points from the third quarter. The New York Fed’s report found that 6.4% of credit card debt was delinquent by 90 days or more, up from 4% in the last quarter of 2022.
"Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels," said Wilbert van der Klaauw, economic research advisor at the New York Fed. "This signals increased financial stress, especially among younger and lower-income households."
The average interest rate on a given credit card is now roughly 21.5%, the highest since the Federal Reserve started tracking rates in 1994.
Silvio Tavares, president and CEO of VantageScore, one of the country’s two major credit scoring systems, said, "The reality is that there are starting to be some significant signs of stress," despite consumers generally being in good financial health.
The Associated Press contributed to this story. It was reported from Los Angeles.