Bankruptcy & Foreclosures

Although I’m known for harping on the risks involved in relying upon credit cards, recent studies show that retirees in the United States are relying on credit cards more than ever before.

In a recent article, John Egan explains that the Depression was responsible for shaping frugal and debt-shy consumers, but towering credit card balances now compel many seniors to seek help.

Their growing mortgage debt and credit card balances are of real concern, says George Gaberlavage, a director of policy research and development at AARP.

Some credit card holders older than 55, already coping with fixed incomes and escalating medical expenses, court trouble with credit cards because they’re being “sandwiched.” A new survey by Ameriprise Financial Inc. shows seniors often assist parents and adult children with loans, health insurance, rent, utilities and other expenses.

The availability of credit “has gone through the roof” over the past two decades, aided by the advent of credit scores and Wall Street’s buying and selling of credit card debt, says Liz Pulliam Weston, a personal finance author and columnist. Twenty years ago, older Americans were less susceptible to credit crises because lending standards were much more stringent, Barbara Whipple, a bankruptcy attorney in Latham, N.Y. says.

Katie Porter, associate professor at the University of Iowa College of Law and project director of the 2001 Consumer Bankruptcy Project, says older Americans are especially vulnerable to the dangers of credit cards, because, among other things, they’re less likely to use debit cards as an alternative.

A report this year from the Institute for Financial Literacy indicated 14 percent of Americans seeking pre-bankruptcy counseling in 2006 were 55 to 64, yet that age group made up 10 percent of the U.S. population. Credit card bills often account for most of the debt.

Facing rising costs for basic necessities, older consumers often are forced to make a choice to go without or borrow to pay,” says Bob O’Connell, a member of the AARP Executive Council. “Of course, many older people go without, often at serious expense to their own well-being. But for those who have chosen to rely on the plastic safety net, borrowing increasingly means sky-high costs and the very real prospect of endless … debt.”

The entire article can be read by clicking here.