TransUnion is one of the nation's biggest credit bureaus, and its Aug. 26 press release had a headline that could cheer up the most morose individual: "National credit card delinquency hits lowest level in at least seven years." In other words, the number of people getting into trouble with credit card debt is lower now than it has been since before the credit crunch and recession. And that fall in delinquencies applies across all age groups, with those over 50 years of age the least likely to have such problems.
So far, so good. However, the press release went on to reveal some more worrying data. While average card balances declined between the second quarters of 2013 and 2014 among younger age groups, they actually went up among those aged 50 year and over.
That's something new. Last year, AARP published a report by think tank Demos showing that the trend of increasing card debt among older people had arisen since its previous study in 2008. Back then, younger people were the ones with rising credit card balances.
TransUnion reckons that in the second quarter of 2014, those in their 50s who had cards owed an average of $6,805, while the average for those aged 60-plus was $4,891. The average was $2,135 for the under-30s and $4,816 for 30-somethings.
There could be trouble ahead
Perhaps, in isolation, those numbers for the over-50s don't sound all that bad. But they need to be viewed in a broader context:
- The Employee Benefit Research Institute's 2014 Retirement Confidence Survey found that 44% of retirees were having problems with their debt levels, and 17% of them owed more than they had five years earlier.
- The same study revealed that 36% (up from 28% in 2013) of those still working had saved less than $1,000 for their retirements. That number shoots up to 73% among those who said they and their spouses didn't have retirement plans, such as a defined-contribution plan or IRA.
- As many as 34% of those aged 50-plus use their credit cards to pay for basic living expenses because they have no choice, according to Demos. They charge items such as rent, mortgage payments, utilities, groceries, and insurance premiums because they lack sufficient funds in their bank accounts to pay those bills. As many as one-half had debt related to medical expenses on their cards.
- They are, in the Demos report's words, "significantly less likely than younger people to run up credit card debt purchasing nonessential goods and services."
Time to close the Bank of Mom and Dad?
Many elders are finding their finances more challenging because they've helped out others. Nearly one in four (23%) say their card balances are higher because they've rescued family members who have had debt problems, according to Demos. The same source points to seniors cosigning credit agreements for younger relatives, sometimes without realizing the obligations and risks of such a kindness.
Meanwhile, a 2012 study by the National Center for Policy Analysis revealed something extraordinary: "The fastest-growing expenditure category for 65-to-74-year-olds is education." On average, that has risen by 14.3% annually since 1990. Some of this may come down to elders taking courses themselves, as well as elderly people contributing to their grandchildren's 529 college plans. But many are also finding themselves on the hook for student loans they co-signed for relations.
What to do if you're a senior in difficulty
What can you do if you're a senior with financial problems? Well, if you're still fit, you may be able to get a job to relieve some of the pressure, but the shadow of age discrimination is long, and many posts open to retirees are low-paying. Still, you may, depending on your circumstances, have some other options:
- If you own your home and have paid off your mortgage (or have only a small balance outstanding), you may, if you're 62 years or older, qualify for a reverse mortgage. This releases some of the equity in your home, and you don't have to make payments to repay the loan. The amount you borrow, plus interest and fees, should be paid off from the proceeds of the sale of your property when you move or pass away. Think carefully and take independent professional advice before taking this route, because the costs can add up over time.
- Consider taking a cash-surrender loan against your permanent life insurance policy. You can generally get up to 96% of its cash value (the investment portion), and normally you don't have to pay this back. But, of course, your heirs will benefit less when you eventually die.
- Talk to a reputable debt counselor about your options. (The National Foundation for Credit Counseling maintains a list that could keep you clear of the sharks.) You may be able to agree terms with lenders that reduce your outgoings.
- Talk directly to your credit card companies and other lenders. Before you do, draw up a household budget and work out precisely how much you can afford to pay each. Don't agree to higher payments than you can afford, or you risk blowing your credibility when you fail to keep up with your commitments. Most card issuers are likely to do their best to accommodate you, within reason, especially if they can see that the alternative is your defaulting or going bankrupt.
With luck, you can avoid those nasty alternatives. Retirement isn't easy for many Americans, but chances are you can make yours more comfortable if you act as soon as a problem appears on the horizon.
This article originally appeared on Index Credit Cards.
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