A recent report by KHON2 sheds light on the growing role of credit in Honolulu's financial landscape. The analysis indicates that consumer debt has significantly increased in Hawaiʻi, which has implications for local businesses and the overall economy.
The report underscores that credit card debt in Hawaiʻi surged by 2.7% between Q3 and Q4 of 2024, leading to an average credit card balance of $7,841. While this increase was not the highest compared to other states, the rise in auto loans and personal loans is a cause for concern. The average auto loan balance jumped by 2.2% to reach $27,088, signifying that more residents are borrowing for car purchases. Additionally, personal loans increased by 1.5% to $15,011.
This rise in debt is attributed to the high cost of living in Hawaiʻi, encompassing housing, groceries, and transportation. With tourism, a vital economic driver, subject to fluctuations, residents often rely on credit cards and loans to meet everyday expenses. This reliance could lead to potential financial strain for many households, which affects the local market for goods and services.
The report stresses the importance of debt management, urging residents to strategize towards repayment, reduce spending, and negotiate lower interest rates on their credit accounts. Addressing these steps can contribute to a more stable financial future and foster a healthier economic environment for Honolulu's entrepreneurs and businesses.
Financial stress can impact consumer spending habits, which can be detrimental for local business owners. A study by News is my Business found that 66% of Americans plan to take on debt for holiday shopping. This is further compounded by the rise of AI-driven recommendations which pushes consumers to spend even more. The average credit card APR for November 2024 was 24.62%, posing a financial risk for many.
