How Seniors Can Get Help With Credit Card Debt

Revolving credit card debt can be a problem at any age, but it's especially troublesome when you're retired and on a fixed income.

Unfortunately, credit cards have become the lender of last resort for some senior citizens who often face medical-related expenses on top of ongoing cost increases in housing, utilities and food.

Here is a look at the problem, ways to deal with credit card debt at an advanced age and how to avoid this problem as you approach retirement.

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Is Credit Card Debt an Issue for Senior Citizens?

Credit card debt has increased among families headed by someone age 65 and older in the last couple of decades, according to a 2018 report from the Employee Benefit Research Institute:

-- In 2016, 42 percent of households headed by someone 65 to 74 years old reported credit card debt, a 10 percent increase from 1992. The median debt also went up in that time period, from $1,174 to $2,500.

-- In 2016, 26 percent of households headed by people 75 years old and older had credit card debt, a 6 percent rise from 24 years earlier. The median also increased from $838 to $2,100, the highest ever measured.

It's notable that the percentages and median amount of debt both went up because, usually, the median falls when there is a large increase in the percentage, says Craig Copeland, senior research associate at the institute and author of the study.

But credit card debt is only part of the problem -- mortgage debt is a major issue as well.

"More families that have elderly heads are placing themselves at risk of running short of money in retirement due to their increased likelihood of holding debt while in retirement," the report states.

Why Are More Seniors Using Credit Cards?

Senior citizens are using credit cards more than in past generations because baby boomers, most of whom are in their 60s or 70s, grew up with credit cards and have continued using them.

Also, unexpected costs in retirement, increased daily expenses and the carryover of debts from their working years have made today's senior citizens more dependent on credit cards.

Credit card debt is "an issue with working Americans, therefore it becomes an issue when they retire," Copeland says. "You still have a very high percentage of people who are reliant on Social Security. They're on a fixed income and don't have a great deal of savings."

The average Social Security check is $1,413, according to the Social Security Administration. About 21 percent of married couples and 44 percent of single adults rely on Social Security for 90 percent or more of their income.
That's why when a financial emergency comes along and loans aren't easy to obtain because of limited income, a credit card might be the only option.

How Seniors Can Manage Credit Card Debt

There are some immediate steps senior citizens can take to address revolving credit card debt.

Prioritizing payments. If you have revolving debt on multiple credit cards, you could pay off the credit card with the highest interest rate, which can help you save on interest.

Another approach is to pay off the card with the lowest balance, then using the amount you would have paid on that card for payments on other higher-balance cards, says Lori A. Trawinski, director of banking and finance for the AARP Public Policy Institute. "Any time you can afford to pay more than the minimum payment, you can also help pay down the debt faster," she says.

It's not easy to make higher payments if you're constrained by a fixed income. But you need to avoid being delinquent with payments, which will exacerbate the problem.

If you're falling behind on payments, "you'll be penalized with a payment fee when you ultimately do pay," and the credit card company might also raise your interest rate, Trawinski says.

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Negotiating with companies. If you're facing financial difficulty, it's usually a good idea to reach out to creditors to see if you can adjust the terms of your debt.

"Borrowers can contact a credit card company directly and try to negotiate a lower payment," Trawinski says. "In some cases, they will be successful in obtaining that."

The key is to deal with the issue right away rather than ignoring it. "The sooner you can address the situation, the better," Trawinski says.

Getting Credit Card Debt Help

One of the best ways for senior citizens to address the issue of revolving credit card debt is to work with an accredited credit counseling agency. An expert counselor can help you sort out your finances and possibly work directly with multiple creditors to address your debt.

Credit counselors deal with issues such as excess credit card debt every day, says Pete Klipa, senior vice president of creditor relations for the National Foundation for Credit Counseling. With a credit counselor, you can work on a repayment strategy based on your situation, including your age, says Klipa.

Trawinski says consumers have to be careful that they're working with a legitimate credit counseling agency so that they avoid scammers. One way to do that is to check with the NFCC, which has a national network of member offices.

Also, you might want to seek input from a financial advisor before you try to tackle your debt problem through mortgage changes -- such as taking out a home equity loan, opening a home equity line of credit or getting a reverse mortgage -- or tapping into a 401(k) or IRA. You'll want to make sure you know the tax implications before tapping into retirement funds, for example.

Getting financial help from family members might be a possibility to explore as well, although that's rarely a simple matter.

Older family members are increasingly seen as go-to money sources by children and grandchildren. "In many cases, older family members will do what they can to help younger family members who are facing financial difficulties," and that can include taking on more credit card debt, Trawinski says. "We also hear about many people who are helping their older parents and grandparents, especially as people are living longer."

Credit Card Debt After Death

Credit card debt doesn't necessarily disappear when someone dies. It could be passed along to a spouse or be taken out of an estate, depending on the situation.

"If a husband and wife are on the same card and the husband passes away, if the wife is a joint account holder, she will be responsible for making those payments," Trawinski says. An authorized user on a card, however, usually isn't responsible for debt if the account holder dies.

Since credit card debt is unsecured, a credit card issuer will do what it can to get the debt paid. The laws on this issue vary by state, but creditors do file against the estate of individuals, Klipa says. As a result, there could be deductions on what heirs will earn once it goes through the probate process.

How Seniors Can Avoid Using Credit Cards

When the bills keep coming -- especially large, unexpected ones -- senior citizens on fixed incomes need to think of alternatives to continually using credit cards.

One option is to negotiate with a company directly to see if there is a way to pay off an expense without using a card. For example, there could be the possibility of a layaway plan for a major purchase. Or, a small business might agree to accept payments over the course of a few months rather than right away.

This is especially true for medical costs. "Consumers should seek out the lowest-cost method of managing their debt," Trawinski says. "If they can get on a payment plan with a medical provider, sometimes those plans are interest-free." They might also be able to negotiate with a medical provider to pay a lower amount than what is billed.

Planning for a Debt-Free Retirement

Retirement planning is tricky. It's not easy to know how long you'll live and what your expenses might be. But experts agree that you need to start early and save more than you think you will need.

"People don't understand the implications of inflation," says Cindy Hounsell, president of the nonprofit Women's Institute for a Secure Retirement.

Everyday expenses may cost more than you expect, and medical issues can complicate the best-laid plans, especially since more people are relying on their own savings and investments and Social Security rather than pension plans.

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"A lot of boomers go into retirement with no clue about longevity, so they're not prepared for what will be paid for (and) what won't," Hounsell says. For example, the remaining life expectancy of a 65-year-old has increased from 14 years in 1940 to just over 20 years today.

People may assume they will be able to work until 65 or 67, but they don't consider that they might be stricken with an illness, or lose their job and not have the ability to get a similar job, Copeland says. That means you could be forced to retire years before you planned to.

To prevent credit card debt from carrying into retirement, Copeland suggests that by 55, consumers' debt level ought to start "going down, not up, at that age."

Ideally, the financial best practices you start before you're ready to retire will carry into, and help prepare you for, retirement.

"Getting yourself to live within your means while you're working will certainly make it easier to live within your means when retire," Copeland says. "If you can't live within your means when you're working, it's almost impossible to do it when you retire."