Why are people in some states scooping up credit cards, while others sit on the sidelines?
In December 2016, the Consumer Financial Protection Bureau released data on credit card originations for all 50 states and the District of Columbia, as of October 2016. D.C. was far ahead of the pack, with a whopping 83 percent increase in new card accounts compared to 2015. Kansas was the state that shunned cards the most, with originations down 40 percent over 2015.
Here are the top six states responsible for generating thousands of new card applications, along with their respective percentage increases:
- Washington, D.C. +83%
- New York +35%
- California +25%
- Virginia +25%
- (tie) Nevada and Massachusetts +24%
A quick glance provides little evidence of a trend. New York, California, Virginia and Massachusetts are all highly populated. Nevada, however, ranks 35th in population, and there are only two states with fewer people than D.C.
The fact that credit card originations in D.C. grew by nearly 50 percentage points more than the next highest populated states suggests it’s an outlier. Interestingly, the district’s GDP is more than three times higher per capita than the nation as a whole. No U.S. state comes close to that.
Meanwhile, the bottom six consists of lightly populated states, the only exception being 9th-ranked North Carolina.
- (tie) North Carolina and New Mexico -12%
- North Dakota -14%
- South Dakota -15%
- Rhode Island -32%
- Kansas -40%
Some of these states’ loss of appetite for credit cards may be explained by economic factors. Kansas has experienced low job and personal income growth in recent years. North Dakota’s fracking boom stalled after oil prices tanked in 2014, resulting in heavy job losses. South Dakota, however, was tied for the lowest unemployment rate in the U.S. as of November. New Mexico saw a smaller decrease in new accounts than South Dakota, but the former’s 6.7 percent jobless rate is the second highest in the nation.
Delinquency rates and existing credit card balances aren’t good indicators, either. Per TransUnion, Mississippi had the highest delinquency rate in the U.S. in the third quarter of 2016, but its originations grew 3 percent. Alaska has the highest average credit card balance per consumer, but its residents still received 10 percent more cards in 2016. Similarly, Virginia ranks No. 2 in average credit card balances, and its new accounts grew by a quarter.
If population, economics and credit card debt burdens can’t explain the trends, what can? Travel reward offers are a big draw for consumers these days. Perhaps a lot of jet setters who live in the New York City, Los Angeles, Washington, Las Vegas and Boston areas are loading up on bonus airline miles offered on new cards. Additionally, these cities’ vibrant arts and entertainment scenes are ripe for some of the “experience oriented” rewards that some issuers provide.
Illinois (19 percent), Florida (18 percent) and Texas (15 percent) are all just outside the top five, possibly due to reward lovers in Chicago, Miami, Dallas and San Antonio. Most of the states where new accounts were flat or down don’t have particularly large cities, except for Pennsylvania, which saw an 8 percent decrease. Culture centers such as New Orleans and Nashville could explain big jumps in card issuance in Louisiana (15 percent) and Tennessee (13 percent).
That isn’t meant to suggest that Kansans, Rhode Islanders and Dakotans have nowhere to go and nothing to do. Perhaps folks in those states have enough credit cards to fill their needs and don’t want any more. People who live in Kansas and the Dakotas are far away from large metro areas. Rhode Island residents, on the other hand, are generally within driving distance of Boston.
The reasons for the disparity in credit card account originations among the states are hard to pin down. It does appear, however, that major metropolitan areas and entertainment meccas — prime spots for spending and reward redemption — are where the action is.