According to a Demos survey taken in 2008, low to middle income citizens 65 and older increased their credit card debt load by 26% from 2005 to 2008. The youngest group in the survey – 18 to 34 year olds – only increased their debt by 1%, while all others reported about a 7% increase.
Why? Are senior citizens suddenly deciding to reward themselves for a life time of working by splurging on trips or new wardrobes or expensive dinners at 4-Star Restaurants?
No, not at all. Consumers across the board are cutting non-essential spending. But as the cost of living rises, seniors are turning to credit cards for necessities. More than half the households responding to the survey stated that medical expenses contributed most to their growing debt.
But the pinch doesn’t just face low to middle income consumers. Seniors who counted on interest income from stocks to fund their retirement dreams are now facing tough choices about their futures. Some who intended to retire and travel are staying at home instead. Some are continuing to work far beyond the day they planned to retire, while others are working at part-time jobs to make ends meet.
Those whose primary source of retirement income comes from Social Security are seeing their lifestyle dwindle as everything from groceries to electricity to heating and automobile fuel increases in price. The meager “cost of living” increases from Social Security don’t begin to cover the rising cost of non-optional living expenses, such as food.
Turning to credit cards to make up the shortfall adds another budget item in the form of a monthly payment, and the credit card issuers’ recent moves have made it even more difficult to keep up. Rising interest rates mean rising minimum payments – and less likelihood of being able to pay down the debt.
The survey showed that close to one in four households is paying over 20% interest on those credit card bills. It also showed that once a person falls behind, it becomes more difficult to catch up. Those who reported paying late payments on credit cards, on average, paid 4 late fees in a single year. Those late fees increase the next month’s minimum payment, making it even more difficult for anyone on a fixed income to stay current.