Seniors and Credit Card Debt

It “started with back surgery,” explained one senior citizen who eventually declared bankruptcy. “I had several medical tests that my insurance did not cover. … The next thing I knew, the bills began piling up.” This senior citizen, whose story was told anonymously in a study by the Social Science Research Network, is not alone. Between 1991 and 2016, the number of seniors filing for bankruptcy increased nearly fivefold.

While debt—and particularly credit card debt—can be a source of difficulty at any stage in life, it is particularly problematic when you are retired. With many retirees living on a fixed income, it can be impossible to keep up with rising food, housing, and utility costs, let alone with any unexpected medical bills.

More than 20 percent of couples and around 45 percent of single retirees are dependent on Social Security checks for the majority of their income. Because these groups have a limited income, it can be impossible to secure a loan to cope with unexpected financial situations. With no alternatives, more and more seniors are finding themselves in credit card debt. According to a report from the Employee Benefit Research Institute, of households headed by individuals aged 65-74, 42 percent had credit card debt in 2016—a 10 percent increase since 1992. The median debt for this group was $2,500 in 2016, more than double what it was in 1992.

If you find yourself with credit card debt, there are some steps you can take even if you are on a fixed income. If you have several credit cards, one option is to focus on paying off the card with the highest interest rate first. Another approach is to pay off the card with the lowest balance and then use the money that would have been spent on that card on your other cards. "Any time you can afford to pay more than the minimum payment,” said Lori Trawinski of the AARP Public Policy Institute, “you can also help pay down the debt faster.”

It can also be worth reaching out to your creditors to see if they can lower your minimum payment. The key is to avoid missing payments, which will make the problem worse. “The sooner you can address the situation,” said Trawinski, “the better." 

If you are not sure how to get out of debt, a credit counselor can help you regain control of your situation by partnering with your creditors and working with you to develop a repayment strategy. To find a reputable counselor, check with the National Foundation for Credit Counseling, who have offices nationwide.

You should also make sure you explore all options before resorting to using a credit card. For example, you can reach out to a business and asking if they can create a payment plan for you. “Consumers should seek out the lowest-cost method of managing their debt," said Trawinski. In the case of medical bills, it may even be possible to negotiate a lower overall amount. "If they can get on a payment plan with a medical provider,” added Trawinski, “sometimes those plans are interest-free."

It can be challenging to plan for retirement. It’s impossible to know how long you will live or what your health situation will be. People are living longer than ever before. "Getting yourself to live within your means while you’re working will certainly make it easier to live within your means when retire," said Craig Copeland of the Employee Benefit Research Institute. As a rule, he suggests, by the time you are 55, your level of debt should be going down and not up.

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