Adults 50 and older carry a surprising amount of credit card debt. According to AARP, 50% of those with credit card debt say part of it is due to healthcare expenses, and 1 in 5 expect it to take more than five years to pay off. What's more, 23% of older adults with credit card debt say they're still paying off balances on canceled cards. This is probably not what they had in mind as they planned for retirement.
If you're retired (or approaching retirement age) and carry credit card debt of your own, it's important to take care of it. Here are four ideas worth considering:
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1. If you don't have a budget already, create one
A realistic household budget is like a GPS for your finances. It maps a path, so you don't get lost.
The keyword here is "realistic." It's easy to build a budget that reflects the way you wish you spent money, but that won't do you much good if you can't stick with it.
Scan your recent bank and credit card statements to track your spending and use those numbers to build a realistic budget. If you can cut an unused gym membership, an unwatched streaming TV service, or other subscription services, cancel them and remove them from your budget.
You'll use your budget for at least two things:
- Track bills as you pay them.
- Locate any extra money you can apply to credit card debt.
2. Pay more than the minimum
Let's say you find an extra $25. Apply it to your next debt payment. While it doesn't seem like much, it will speed up the rate at which the debt is paid off.
3. Consider debt consolidation
Debt consolidation involves taking out a new loan with a lower interest rate to pay off existing high-interest rate debt. For example, taking card debt at 21% and consolidating it into a personal loan at 10% or 11% can save you a bundle in interest payments.
4. Negotiate with creditors
If you're having trouble paying your credit cards, call your credit card company to find out about any assistance they have available. Most creditors would rather get some money than see you file for bankruptcy. Ask if the company will lower your interest rate or your monthly payment to an amount you can afford.
If you get a lump sum of money, ask if you can use that to make a single payment. For instance, say you owe $5,000 on a credit card and you get a $2,000 tax refund. Tell the company you'll make a lump-sum payment of the $2,000 in exchange for them writing off the full $5,000 balance.
One thing to keep in mind is that negotiating with creditors is likely to lower your credit score, at least temporarily. However, if your credit score is already lower than you would like, it may not significantly affect your life. Make it a point to pay all remaining bills in full and on time each month, and you can watch your credit score slowly recover.
No matter how much credit card debt you carry, you're never too old to come up with a plan to outsmart it.
