Bankruptcy filings up among older credit card users, but experts offer quick ways to rein in debt
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The rocky years of the Depression shaped frugal and debt-shy consumers, but towering credit card balances now compel many seniors to seek help.
Their growing mortgage debt and credit card balances are of real concern, says George Gaberlavage, a director of policy research and development at AARP.
Some credit card holders older than 55 –already coping with fixed incomes and escalating medical expenses — court trouble with credit cards because they’re being “sandwiched.” A new survey by Ameriprise Financial Inc. shows seniors often assist parents and adult children with loans, health insurance, rent, utilities and other expenses.
“My experience is that credit card debt is one of the top reasons seniors seek bankruptcy protection,” says Barbara Whipple, a bankruptcy attorney in Latham, N.Y.
“Older consumers who turn to me for help are embarrassed, ashamed and often do not talk to their children about their financial problems. The biggest complaint I hear is,’I pay and pay every month, and my debt doesn’t go down, even when I don’t make purchases,’ ” Whipple says.
The availability of credit “has gone through the roof” over the past two decades, aided by the advent of credit scores and Wall Street’s buying and selling of credit card debt, says Liz Pulliam Weston, a personal finance author and columnist. Twenty years ago, older Americans were less susceptible to credit crises because lending standards were much more stringent, she says.
Cate Williams, vice president of finance at Money Management International, a nonprofit organization that offers financial guidance and debt management services, says she expects the percentage of older Americans seeking pre-bankruptcy counseling to climb.
They’re supposed to be in the best of their financial years, Williams says, but they’ve got “serious, serious debt” to get rid of.
Katie Porter, associate professor at the University of Iowa College of Law and project director of the 2001 Consumer Bankruptcy Project, says older Americans are especially vulnerable to the dangers of credit cards, because, among other things, they’re less likely to use debit cards as an alternative.
A report this year from the Institute for Financial Literacy indicated 14 percent of Americans seeking pre-bankruptcy counseling in 2006 were 55 to 64, yet that age group made up 10 percent of the U.S. population. Credit card bills often account for most of the debt.
The Administrative Office of U.S. Courts shows that seniors file for bankruptcy more often than young people.
Porter quotes a review of thousands of credit card accounts by the Massachusetts Institute of Technology Department of Economics which suggests that older Americans borrow at higher interest rates and cough up more late-payment, over-limit and cash-advance fees.
They try to pay their bills, only to be trapped by high interest rates and fees, Whipple says.
Facing rising costs for basic necessities, older consumers often are forced to make a choice to go without or borrow to pay,” says Bob O’Connell, a member of the AARP Executive Council. “Of course, many older people go without, often at serious expense to their own well-being. But for those who have chosen to rely on the plastic safety net, borrowing increasingly means high costs and the very real prospect of endless … debt.”