Credit Card Debt Rises for Seniors

CU360
September 17, 2009 | COMMENTS

Debt among older U.S. credit card holders has risen sharply since 2005, as senior citizens increased borrowing to pay for necessities, according to a new study from public policy group Demos.

The study shows that low- and middle-income consumers 65 and older carried an average $10,235 in card debt last year, up 26% from 2005. Card debt for all borrowers surveyed rose 3% during that time, to $9,827.

Overall, revolving debt has risen 400% since 1989 and 41% since 2000 among households that fall between 50% and 120% of the local median income, says the study, The Plastic Safety Net: How Households are Coping in a Fragile Economy.

Seventy-five percent of those income groups used their credit cards for car repairs, house repairs, or to cover expenses after a drop in income. More than one-third of survey respondents said they used credit cards to cover basic living expenses, while half said revolving credit was used to pay medical bills.

Demos concludes that vulnerable consumers are turning to credit cards for necessities, not luxuries. "The frivolous spending idea—that's not what's driving families into crazy debt," Jose Garcia, a Demos associate director, tells USA Today. "The expense that most affects families is the cost of living."

The findings are in line with other industry research showing that seniors are going deeper in debt. From 1992 through 2007, the latest data available, older Americans' credit card debt grew faster than the overall population, according to the Employee Benefit Research Institute, a non-partisan group that studies economic security.

"You see a great increase in credit card debt for people near retirement age," says Craig Copeland, a senior research associate at EBRI. "They're probably still working, but they're also the most likely to become disabled," which could force them to rely on credit cards.

Demos' survey found that those carrying credit card debt are also paying more for it: Close to one in four households now pay more than 20% interest. And households charged late fees paid an average of four fees during a 12-month period.

These high rates and fees can upend consumers' budgets, advocates say. "When your interest rate goes up, it's another hammer blow to your ability to make ends meet," says Sally Hurme of consumer group AARP.