Credit card debt: 6 steps to help get you through paying them off
If you’re ready to start tackling your credit card debt, here are 6 steps to help you out along the way.
USA TODAY
The share of older Americans with debt has nearly doubled in 30 years, a trend that alarms retirement researchers.
Elder debt has been rising fitfully for decades. Among Americans 75 and older, 53% carried debt in 2022, compared with 21% in 1989, according to the federal Survey of Consumer Finances, released this month.
Among people aged 65 to 74, the share with debt rose from 50% in 1989 to 65% in 2022.
More older Americans are carrying debt across a broad range of categories: mortgage debt, home equity lines of credit, car loan debt, credit card debt, and student loan debt.
Seniors do not hold more debt than other Americans, but they may face a steeper challenge in repaying it. Older Americans are more likely to live on fixed incomes and to face rising healthcare expenses.
Some kinds of debt carry a relatively low risk for seniors: Think of a low-interest mortgage on a home that is rising in value. Other debts carry higher risk, such as a five-figure balance on a credit card with a surging interest rate.
Retirement advocates worry about them all.
“I’m not here to say there’s good debt or bad debt,” said Josh Hodges, chief customer officer at the nonprofit National Council on Aging. “I’m here to say debt increases the chance you’ll age into poverty.”
Older Americans, too, struggle with credit card debt
Most concerning, to many researchers, is the rise in high-risk debt among seniors, especially credit-card debt.
The share of over-65 households with high-risk debt rose to 43% in 2019 from 25% in 1989, according to a recent study by the Center for Retirement Research at Boston College.
Thirty percent of over-75 Americans carried credit card debt in 2022, compared with 10% in 1989.
Many credit-card borrowers are middle-income seniors, some of whom have “no apparent need to borrow,” the Boston College researchers found.
That data point suggests many seniors are borrowing to cover large and unplanned expenses.
“One theory might be that they don’t have sufficient emergency savings or a rainy-day fund, so, when unexpected expenses come up, the credit card is the first thing they rely on,” said Anqi Chen, assistant director of savings research at the Center for Retirement Research.
Another new study, from AARP, found that nearly three in four Americans over 50 carry some form of debt, especially credit card debt.
The AARP analysis found that a significant share of that age group spends half or more of their monthly incomes on debt payments. The study draws from a representative survey of about 7,400 Americans over the age of 50.
“A much higher percentage of families are carrying various types of debt into the retirement years, and the amount of debt is also increasing,” said Lori Trawinski, director of finance and employment at AARP Public Policy Institute. “It’s not uncommon to see someone with a mortgage, a car loan, a student loan and credit-card debt.”
Older Americans face more challenges in paying down debt
Seniors tend to hold less debt than younger Americans, but they also face more hurdles in paying it down.
The average baby boomer, aged 59 to 77, carried $19,203 in non-mortgage debt in the second quarter of 2023, according to Experian, the data analytics company. That figure falls slightly below the overall national average of $23,317.
Mortgage debt averages $190,441 for boomers, compared with an overall average of $241,815.
Younger Americans who amass debt are relatively well-positioned to repay it, researchers say: They have many years of employment awaiting them, and their annual salary is apt to rise from year to year.
Older Americans with debt often have more trouble getting rid of it. They are less likely to be working, face more health issues and have fewer tools to increase their income over time.
A newly minted MBA, and $70,000 in student-loan debt
Liz Harriger, 60, returned to school in midlife and earned an MBA in 2017, hoping to launch a new career as a physician assistant in Taylorsville, North Carolina, where she lives.
Yet, by the time she had earned the degree, Harriger was hobbled by osteoarthritis, a degenerative joint disease.
She hasn’t worked in two years. She holds more than $70,000 in student loan debt and $2,800 in credit card debt, and she has struggled with payments. She has been living on $13,000 a year, funds withdrawn from her retirement account.
“If it wasn’t for my boyfriend, I’d probably be homeless,” Harriger said. “Or living with my sister.”
Medical setbacks pose multiple perils to older Americans. One is the potential to sideline them from work, robbing them of earnings. Another is the threat of debt.
Seniors face more than $50 billion in unpaid medical debt, according to a recent report from the federal Consumer Financial Protection Bureau.
A rising share of older Americans hold mortgage debt and auto loans, secured against the value of the home or automobile. Among Americans 75 and over, the share with home-secured debt rose to 28% in 2022 from 6% in 1989, according to the federal survey.
Some of this increase reflects a generational shift. Half a century ago, many Americans considered it a rite of passage to retire with a home that was paid off.
“I look back on my grandparents’ generation, and you just didn’t retire with debt,” said Catherine Collinson, president of the nonprofit Transamerica Center for Retirement Studies.
In the current generation of older Americans, by contrast, many homeowners chose to refinance at attractive interest rates in their autumn years.
While mortgage debt is low-risk, researchers say, it is not without risk.
“If I have a mortgage on my home and I can’t pay it, I may lose the home and be evicted,” said Trawinski of AARP.
What is a “high-risk” borrower?
Boston College researchers identified distinct groups of high-risk borrowers:
- The largest group comprises households with low wealth and high debt, families struggling with essentials, such as food and shelter, and “borrowing just to get by,” the researchers said.
- A second group struggles primarily with credit card debt.
- A third group comprises lower- and middle-wealth households that might be termed house-poor. They spend more than 40% of their income on housing. Their house may have stagnated or even declined in value.
- A fourth group, “wealthy spenders,” are upper-income households that spend a large share of their income on debt. They tend to hold credit card debt. Many own second homes, which can add to their debt burden.
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But low-income families, researchers say, remain the most vulnerable to high-risk debt. The share of seniors living in poverty has risen in the pandemic years to 14.1% in 2022 from 9.5% in 2020, according to Census data.
“We have not solved older adult poverty,” said Hodges of the National Council on Aging. “It is getting worse.”
