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Middle Age Americans Carrying More Credit Card Debt

by , January 16, 2013. (Posted in: Debt / Personal Finance News)


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Today’s younger adults might be struggling to resist whipping out their new credit card for that new handbag or jet ski or maybe even a weekend getaway, but there’s a fact many may find surprising: in 2012, Americans age 50 and older actually owed more on their credit cards, on average, than younger people in low and middle-income households carrying credit card debt. Surprised? So are we. Here’s why that’s happening and why it’s alarming –

On average, low and middle-income Americans under the age 50 had $6,258 on their credit cards. For those aged 50 and over, their average was a surprising $8,278. Remember, this is the age that we traditionally begin reining in our spending. We’ve seen it all, splurged on it all and own or have owned it all at some point and we’re just simply not swayed by the latest “must have” material possession. We’re looking more towards financial stability. It makes sense then that these folks weren’t splurging on the special 13 DVD collection of every season of The Bachelor – they were relying on their credit cards for their basic living expenses. That might included doctor’s visits, utility bills, groceries or prescriptions.

The new research is part of the AARP Public Policy Institute’s Middle Class Security Project and in this survey, it paid special attention to the reasons why older Americans find themselves coping with so much credit card debt. You might find it surprising to learn the reasons why, too.

  • In older households, one third used credit cards to pay for basic living expenses such as rent, mortgage payments, groceries, or utilities.
  • One half of Americans age 50+ carried medical expenses on their credit cards – and that number is growing. The main contributors were prescription drugs and dental expenses.
  • Twenty five percent of older households said loss of a job contributed to their credit card debt in the last three years.
  • Eighteen percent of older Americans nearing retirement said they dipped into retirement funds to pay down credit card debt.
  • Older Americans were twice as likely as those under age 50 to take on credit card debt to assist other family members

This report suggests that credit card debt among older Americans is primarily a reflection of difficult economic times, not a lack of personal financial responsibility.

No one was surprised that credit card debt is down for consumers of all ages. The financial crisis and devastating housing crash resulted in lenders across the board to rein in their offers of credit. Not only that but $211.1 billion in credit card debt was written off as noncollectable. Those families hit by the recession found themselves with fewer credit options and as a result, millions of Americans began to rethink what was really important. Paying down their bills, living a bit more frugally and instilling good habits in their children became the new way of doing things. And still, credit card debt levels among older Americans declined less than they did for young people. In fact, Americans age 75 and older are the only group in the new survey that credit card debt actually increased.

I don’t know about your grandmother, but mine is just as sharp as she’s always been and still sees potential in a simple penny. She saves like nobody’s business. Turns out, most in these age brackets are incredibly resourceful and cautious. They’re not blowing the inheritance, they’re not racking up credit card debt on purpose and they’re not taking lavish cruises every few months. They’re simply covering medical expenses, auto and home repairs, and job loss. They’re also buying groceries and their monthly medications.

Even with Medicare, which provides coverage to those age 65 and up, half of those 50-plus report having medical expenses on their credit cards. Further, a full one half of older Americans (and a surprising number of younger consumers) admit that they’ve skipped some type of recommended or even needed medical care. Usually, it’s opting against filling a prescription or canceling a doctor’s appointment because they didn’t have enough to cover the visit. Follow up visits were bypassed too by many seniors.

Many of us simply assumed many, already prepared for retirement, opted for an early retirement when the recession hit. Many were offered early retirement packages through their employers, after all. Turns out, unemployment is still a a big problem for those 50-plus Americans who do lose their jobs. On average, they’re out of work far longer than their younger counterparts. Only 25% are able to find a job once they’ve been laid off or forced into early retirement. That means they might struggle to cover their credit card debt. One in seven say that’s their biggest concern.

The report makes it clear:

The overall picture is one of precariousness, of a population turning to a high-interest “plastic safety net” during difficult times.

Indeed, this is a problematic trend for our parents and even our grandparents. Throw in a few credit cards and it can quickly become overwhelming. Many are filing bankruptcy, others are draining their retirement accounts – and that’s especially worrisome because these are the same retirement accounts they’ve carefully cultivated for decades as they planned to enjoy their retirement years.

Remember, too, adding to their worries are the ridiculous bickering amongst our elected leaders. The budget debates and policy makers who are threatening everything from cuts to Social Security and Medicare to threats by Republicans to do away with the new financial laws as soon as they can do so have many seniors losing sleep at night.

As younger adults budget their credit card payments so that they can take that single’s cruise this summer, the older Americans are doing their best to ensure they can get their needed medications and groceries.

Are you struggling with credit card debt? Have you retired? Maybe it’s your parents who are doing their best – share your story with us and our readers. We want to hear what you have to say.

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