BOSTON — Older consumers, traditionally, have not carried as much of a debt load, particularly credit card debt, when compared to younger consumers.

As the kids have grown and the mortgages and other debts have been paid down, older consumers have often seen their overall debt load–and use of credit cards–diminish. But a new study from the National Consumer Law Center suggests that this may be changing.

The Center released The Implications of Rising Credit Card Debt Among Older Consumers in July and it indicated that the average credit card debt for Americans between 65 and 69 increased by 217% between 1992 and 2001, rising to an average of $5,844.

The report found that average self-reported credit card debt among the 23% of all seniors holding such debt increased by 89% in constant dollars, to $4,041. During this same time period, among the 70% of all seniors over 65 with incomes under $50,000, about one in five families with credit card debt was in debt hardship, as defined by a nonprofit research group, Demos.

The study cited a 2006 American Association of Retired Persons report which found that close to half of U.S. adults age 40 or older see their current level of debt as a problem. About 12% see it as a major problem. About 30% of retirees in the survey described their debt as a problem. Only 7% of retirees said they did not have any debt

The report also found that elders have begun filing bankruptcy at record numbers because the debt load that is being assumed is, in many cases, so called “unaffordable” debt, debt that comes in the mail in card offers special deals and which elders sometimes agree to take.

The Center reported that very few older consumers borrow money without intending to repay it, but that they wind up using cards as a “plastic safety net” to make purchases they need and could not otherwise afford.

“There is little margin for error with older populations,” the report said. “Those who lose income over time or who slip in and out of poverty have fewer working years, if any, to replace resources and save. A lack of financial knowledge exacerbates these problems. Researchers have found widespread financial illiteracy among older Americans.”

The report cited three reasons as playing a role in the rise in the debtload of older consumers: shrinking income, higher expenses for many day-to-day things and creditor practices which often “push” consumers in making poor decisions about debt.

When it came to “shrinking income,” the study found that older consumers' traditionally good habits on debt are often not able to help them beat the new debt challenge.

Despite high home ownership rates and a generational ethos of thrift, the largest share of older Americans “live on low incomes that stagnated or declined during most of the 90s, while their basic costs increased,” the report cited. “Critically, their most important bulwark against debt–savings and assets–also diminished.” Although many elder-headed households are able to save for retirement and live well as they age, median income on average is much lower for households headed by persons over 65. In 2004, median income for elder households was $24,509 compared to $50,923 for households headed by persons under 65.

“Financial insecurity is especially acute among senior women,” the Center reported. “Compared to older men, older women are more likely to be single and live alone, more likely to face poverty and less likely to engage in full-time year-round work prior to retirement. With women's earnings reaching only two-thirds of men's among full-time year-round workers, women are more likely to receive lower median annual Social Security benefits than men, although Social Security is the most common source of income for both genders in retirement. Women are also less likely to receive pension benefits and those women who are entitled to them receive only half the amount received by men.”

The higher expenses that the report cited included housing costs, rising out-of-pocket medical costs and energy costs, but the report focused most closely on credit card company practices as part of the problem, including both marketing and management practices which other consumer groups have often targeted.

But the report pointed out that default percentage rates and mail practices, which can merely ensnare other consumers, can wreck real harm on older ones.

“For example, Deborah, age 80, was paying hundreds a month to keep all her cards current right into early 2005 and not telling anyone of her predicament,” the Center reported. “Her daughter, who has been helping Deborah untangle her mess, showed us an October 2001 statement from Bank of America, whose 29.99% interest card had the largest balance. Four years and many thousands in payments later, the balance on that card had actually gone up a bit. Deborah had been paying for years, without adding any new charges, and still ended up further behind…Her biggest mistake appears to be that she simply did not foresee how quickly her card payments would overwhelm her income once she finally retired at age 75.”

The Center recommended a mixture of regulatory and educational reforms that it said are necessary to help prevent older consumers from being victims of credit card programs.

Instant Insights /

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