The Most Debt-Free States in America

PHOTO: A map of the United States.

Keep your credit card balances low and you'll not only save money on interest, but you'll probably sleep better at night as well. By that measure, residents of Iowa should be getting a good night's sleep. According to data from Experian-Oliver Wyman Market Intelligence Reports and Experian's IntelliView tool, Iowans carry the lowest average credit card balance per consumer in the U.S. with an average balance of $2,904, as of the second quarter of 2013.

Close behind Iowa was North Dakota, where the average total credit card balance was $2,971, followed by Utah ($3,014), South Dakota ($3,168), Wisconsin ($3,204), Idaho ($3,225), Nebraska ($3,326), Montana ($3,408), West Virginia ($3,411) and Kentucky ($3,424).

Here are the rankings at a glance:

10. Kentucky ($3,424)

9. West Virginia ($3,411)

8. Montana ($3,408)

7. Nebraska ($3,326)

6. Idaho ($3,225)

5. Wisconsin ($3,204)

4. South Dakota ($3,168)

3. Utah ($3,014)

2. North Dakota ($2,971)

1. Iowa ($2,904)

Some of these states were featured in Credit.com's previous analysis of states that would lead the housing recovery, due to a combination of high credit scores, and low numbers of severely delinquent mortgages and foreclosure inventory, among other factors. States that ranked high in that survey and this one include North Dakota, South Dakota, Nebraska and Montana.

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Long Way to Go

On the other end of the spectrum, the state with the highest average credit card balance is Alaska, where residents carry an average credit card balance of $4,706. New Jersey citizens are close behind with an average balance of $4,523. Other states with the largest average balance include Connecticut ($4,420), Maryland ($4,311) and Delaware ($4,296).

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In a recent Credit.com survey, 23% of respondents said the American Dream means being debt-free. This data shows that in many parts of the country, we have a long way to go.

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High credit card balances can be expensive. With a 16% interest rate, a $4,000 balance will cost a consumer roughly $640 a year in interest. If the consumer pays only the minimum payment each month, it can take 20 years to pay off, and cost nearly $4,800 in interest.

In addition, high credit card balances can hurt credit scores. One important factor in calculating credit scores is the amount of debt the consumer carries. Among other things, that factor takes into account how close the borrower's balance is to his or her credit limit. (This is called the utilization ratio.) A high utilization can lower a consumer's credit scores, and make it more difficult to consolidate debt at a low interest rate.

You can see how your credit card debt impacts your credit score, as well as compare your debt to what other Americans carry, using Credit.com's free Credit Report. You'll get your credit score, as well as a snapshot of how your debt compares to the national average.

For those who are having trouble paying off credit card debt, there are a variety of free and low-cost debt-reduction services that can help, including online money management programs and credit counseling.

This work is the opinion of the columnist and in no way reflects the opinion of ABC News.

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