THE BLOG

Why Grandma Owes More on Her Credit Cards Than You Do

01/15/2013 08:08 pm ET | Updated Mar 17, 2013

If you thought credit card debt was mostly a young person's problem, think again. In 2012, Americans age 50 and older actually owed more on their credit cards, on average, than younger people in low- and middle-income households carrying credit card debt.

While low- and middle-income Americans under 50 had $6,258 on their cards on average, those 50 and over averaged a whopping $8,278. At an age when many Americans are hoping to achieve a modicum of financial stability, more than a third of those in our survey population age 50+ relied on credit cards at some time in the past year to pay their basic expenses. That's the troubling finding of my new study released today by AARP and Demos. The research, part of the AARP Public Policy Institute's Middle Class Security Project, explores a number of reasons why older Americans find themselves coping with so much credit card debt.

The reality is, credit card debt for nearly all age groups declined between 2008, when we did our last study on credit debt, and 2012. That's because the financial crisis and housing crash caused lenders of all kinds to offer less credit; $211.1 billion in credit card debt was written off as uncollectable; and households hit by the recession made renewed efforts to live frugally and pay down their bills. But we found that credit card debt levels among older Americans declined less than they did for young people. In fact, Americans age 75 and older are the only group in our survey for which credit card debt actually increased over this time period. Why?

The Greatest Generation didn't suddenly become recklessly spendthrift and go wild on eBay. And while our sample size of those age 75-plus is too small to look at their credit card spending practices with great accuracy, we find that credit card debt for those age 50 and over has a lot more to do with the ways the tough economy hit this group than any lack of financial responsibility on their part. Leading contributors to credit card debt for Americans age 50-plus include medical expenses, auto and home repairs, and job loss.

Despite the fact that Medicare provides coverage to those age 65 and up, half of those 50-plus report having medical expenses on their credit cards. In addition, half of older Americans (and a comparable proportion of younger people) say they skipped some type of recommended medical care -- failing to fill a prescription, opting not to see a doctor of visit a clinic for medical problems, or skipping medical tests, treatment, or follow-ups -- in an effort to reduce medical expenses and medical debt.

Throughout the recession, older Americans have generally enjoyed a lower unemployment rate than their younger counterparts. Yet unemployment is still a tremendous problem: those age 50-plus who do lose their jobs are, on average, out of work much longer than younger cohorts. As a result, nearly one in four of those age 50-plus say job loss has contributed to their credit card debt. More than one in seven say job loss is the biggest contributor.

The overall picture is one of precariousness, of a population turning to a high-interest "plastic safety net" during difficult times. This instability has especially troubling implications for the retirement security of older Americans with credit card debt. Indeed, many older Americans report that in order to pay off their credit card debt and deal with unexpected expenses, they dug into their savings -- including retirement funds that people on the cusp of retiring would soon need to live on. Others declared bankruptcy.

As budget debates rage in Washington and policymakers contemplate cuts to Social Security and Medicare, they must bear in mind the instability and tight budgets that are already driving older low- and middle-income Americans to rely on high-interest credit cards to pay the bills. No age group should have to rely on a have to rely on a "plastic safety net" of credit card debt to make ends meet.