Budget Basics
In Plastic society, seniors change on credit. Debt grows for elderly as they try to fill medical and basic needs.
Credit:Personal Finance Writer
Sunday June 6, 2002
"I can't be in debt and die,"
says Juanita Spencer, who is legally blind and receives help from a volunteer to
pay credit card bills.
For this Depression-era generation, the lesson has
been to pay your debts and owe no one.
But at a time when senior citizens should
be basking in their retirement, a disturbing trend is emerging: Many are struggling
to pay off credit card bills.
And the use of credit cards by the elderly will
continue to increase over the next two decades, according to Dr. Robert D. Manning,
professor of humanities at Rochester Institute of Technology in New York.
"The elderly are living longer, and that's leading
to a host of abuses," Dr. Manning says. "The aging of the boomer generation means
you've got people aging into debt, which typically you didn't have."
Eventually, Dr. Manning says, the use of bank credit
cards by seniors will mirror their use in the general U.S. population. "We're seeing
some serious debt - $40,000, $50,000 and $60,000 in credit card debt," says Suzanne
Cobb, director of the Guardianship and Money Management program at Senior Citizens
of Greater Dallas, a nonprofit organization. "They're using those credit cards to
pay for basic necessities, prescription drugs, groceries. The credit card company
will send them another application, and
it just snowballs on them."
A big reason for the increasing debt, experts say,
is that many seniors haven't saved enough for retirement. "A lot of times, people
are ill-prepared to retire and use the credit card as supplemental income for basic
expenses" says Howard Dvorkin, president and founder of Consolidated Credit Counseling
Services in Fort Lauderdale, Fla.
Total average debt of households headed by someone age 65 or older soared from $8,000 in 1992 to $23,000 in 2000 - an increase of 188
percent - according to SRI Consulting Business Intelligence in Princeton, N.J.,
a research and consulting firm. By comparison, the average credit card balance for
those ages 25 to 34 is $3,224.
The total average debt figure includes debt from
credit cards, home equity loans, installment loans, vehicle loans and margin accounts
from brokerage firms. The average credit card balance carried by seniors also rose,
from $1,280 in 1992 to $1,897 in 2000 - an increase of 48 percent.
By 1996, seniors' average credit card balance actually
had jumped to $3,436, but that number dropped steadily during the next four years.
It's just a waste of money, but you can't live without
it. So how do senior citizens end up in such debt? Many find
themselves in the hole
because they don't understand how credit works, experts say.
They don't understand the "nature of high interest
charges and penalties that can accrue with credit card bills," Dr. Liuzzo says.
"By making the minimum payment, your balance can actually go up." Many others get
in credit card trouble by helping family members, experts say.
"We see folks helping out children who are struggling,"
Mr. Dvorkin says. "They let the child use credit cards for various reasons." The
easy availability of credit and a desire to keep up with the Joneses also contribute
to seniors' credit problems, experts say.
If you find yourself with credit problems, sit down
and create a spending plan, listing your income and expenditures, experts say. That
will tell you what money is coming in and where you're spending it.
So avoid using credit for basic living expenses
unless you have a sure way to generate the revenue that will support that debt.
In the case of medications, look for special programs that will help you.
