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Hawaii’s high cost of living has given residents the dubious honor of having the second-highest consumer debt per person in the nation. Read more

Hawaii’s high cost of living has given residents the dubious honor of having the second-highest consumer debt per person in the nation.

Total consumer debt per capita was $67,010 in 2015, just $10 below the No. 1 state, Maryland, according to a state Department of Business, Economic Development and Tourism report released Monday.

Ten years ago Hawaii was No. 6 in consumer debt. But as most Americans got rid of debt since the 2008 recession, Hawaii residents took on more debt relative to their income.

TIPS FOR PAYING OFF CREDIT CARD DEBT >> Stop using the card or cards — put them in a drawer or cut them up if that is the only way to get your spending under control. >> Put yourself on a strict budget. >> If you cannot control your spending, cut up the cards and go to a limiting budget. >> Restructure your debt. Talk to your bank or credit union about a debt consolidation loan. This type of loan is likely to carry a lower rate than credit cards and will require regular payments. >> The best way to improve your rate is to clean up your credit record. >> Always pay on time. Set up an email or text reminder. Set up an automatic minimum payment (but be sure the money is available for the minimum payment). >> Always pay at least the minimum payment. Better yet, pay off the balance every month. Pay as much as you can. Put payment of credit bills ahead of any discretionary spending. >> Never charge over 80 percent of your credit limit. Using above 80 percent of your limit can lower your credit rating. >> If you have a good credit record, you can negotiate your APR. You should always try. Source: Judith Mills Wong, former finance instructor, University of Hawaii Shidler College of Business

In real terms, consumer debt in the U.S. declined 10.7 percent from 2005 to 2015, but in Hawaii it declined only 1.7 percent.

The report revealed Hawaii residents have higher credit card debt, hitting the fourth highest in the nation in 2015. Per-person credit card debt for 2015 was $3,460, or 23.6 percent higher than the U.S. average of $2,800.

The report said the higher balances could be a result of the higher cost of living Hawaii residents face compared with the national average.

“Even though Hawaii residents have high levels of credit card debt, they typically tend to pay their credit card bills on time,” the report said.

For credit card delinquencies, Hawaii ranked 24th in the nation in percentage of credit card debt overdue 90 days or more.

Auto debt is less of a problem in Hawaii, with the state coming in at 45th in the nation. Hawaii’s total per-person auto debt was $3,330, or 19 percent lower than the U.S. average of $4,070.

The report also showed that Hawaii ranked lowest in the nation for per-person student debt in 2015.

Hawaii’s total per capita student debt was $3,150, or 32.4 percent lower than the U.S. average of $4,660.

The lion’s share of the debt came from mortgages, making up 77.3 percent of the state’s debt composition.

Chief state Economist Eugene Tian said the state’s high housing prices as well as low mortgage rates in recent years caused mortgages to make up such a large percentage of consumer debt.

“In the recent years the mortgage rates have been very low,” he said. “That is the main factor. … There are more people purchasing homes.”

Tian said there are advantages and disadvantages to homeownership taking up a such a large portion of the state’s consumer debt.

“When they own their homes, they feel confident,” Tian said, noting that although the debt is high, deductions on federal income taxes allow a portion of the mortgage debt to be passed on to the federal government.

Tian said high mortgage debt can also hurt the economy as it could cause homeowners to spend less on other goods and services, lead to higher rents and cause some mortgage payments to leak to out-of-state financial institutions.

“Our general excise tax collection would be smaller (as people spend less),” he said.

The report said Hawaii’s 2015 household debt-to-income ratio was higher than the pre-recession level, increasing to 1.76 from 1.70 in 2005.

Eric Mais, professor of finance at the University of Hawaii at Manoa’s Shidler College of Business, said the nature of the debt is significantly different from 2008.

“Those consumers who have a relatively high income and a high credit score, their debt is primarily mortgage debt on their home … whereas you look at lower-income consumers that have low credit scores, it is mostly in the form of car loans,” he said. “If you are borrowing money to buy a house that you live in, and the house appreciates in value, that is much less riskier than taking a car loan.”

However, mortgages have been rising faster than incomes in the state.

Hawaii’s mortgage debt-to-income ratio in 2015 was 1.36, 52 percent higher than the U.S. ratio of 0.89. Over the past 10 years, mortgage delinquencies in Hawaii increased from being the lowest in the U.S. in 2005 to 10th in 2015.

The shortage of homes, particularly on Oahu, has led to problems with housing affordability, Tian said.

“We didn’t produce enough housing,” he said. “That drives housing prices up.”

Hawaii ranked highest in the nation with the average amount of per-person debt at $5,300 in the “other” debt category of DBEDT’s report. The “other” category includes home equity lines of credit and other consumer debt.