The recent recession may have led to significant financial problems for millions of Americans, but those most affected by the problems might have been people who were within several years of their retirement. Many of these people were forced to rely on credit cards to make ends meet, but now have massive debt as a result.
The average person over the age of 50 with a middling income who has owed money to credit card lenders for three months or more now carries a debt of $8,278, according to new data from the research and policy center Demos. Meanwhile, those under the age of 50 who otherwise fall into the same categories carry balances averaging just $6,258.
A large reason for this seems to be the hard times on which millions of older workers may have slipped during the financial downturn, when unemployment skyrocketed, the report said. Many people over the age of 50 were forced to use their accounts to cover basic everyday expenses, but were not able to fully pay back their lenders for the full value of the debts they added to their accounts at any point since. For instance, half of those in the older demographic said they carry medical expenses on their credit cards, including prescription drugs and dental care. Further, another 49 percent said they also used their cards to cover auto repairs, while 38 percent said the same of home repairs.
Most troubling, though, is that 34 percent of those over the age of 50 use the cards for the most basic expenses in their lives, such as mortgage payments, groceries, utilities and insurance, the report said. This is often because they don’t have enough cash on hand to cover these costs otherwise.
In all, about one quarter of those polled over the age of 50 said they have these larger amounts of credit card debt as a result of job loss, and 15 percent noted that this concern was the biggest contributor to their debt issues, the report said. Further, 18 percent of those between 50 and 64 said they’ve drawn on retirement savings to cover their credit card payments.
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Credit card debt can be especially problematic for borrowers who have high interest rates, as their balances can grow significantly in relatively short periods of time if only the minimum contributions are being made every month.
Image: Abdulsalam Haykal, via Flickr