Seniors with Credit Card Debt

Seniors are more susceptible to consumer debt and more specifically credit card debt than most because they are on a fixed income. Most seniors rely on SS or pension income, so an unexpected expense like a medical bill, car issue, etc. can completely throw their entire budget out of wack and derail their entire financial situation. Moreover, although pension and social security benefits tend to rise with the adjusted rate of inflation, the cost of living in the US has dramatically increased in recent years. The inflation adjusted increase in SS has surely not accounted for the full effect of prices increases in food, shelter, etc. Credit card debt has become a particular concern for seniors since it is only meant to be used as a short term and revolving lending vehicle. Credit card APRs are extremely high and if you do not pay your balance off at the end of the month (which may be hard to do on a fixed income) you may get caught in a vicious cycle of revolving debt.

What Options Are Available to Seniors?

There are a few options available for seniors. Seniors can begin the process of digging out of credit card debt by re-doing their budget to account for any unexpected expenses and using the debt snowball method. You can also make use of a debt consolidation loan (given you qualify with your debt to income ratio). If you cannot qualify for a consolidation loan, the best option may be a debt reduction program. This is typically a good option for consumers who don’t plan on using their credit cards in the short term. If you’re already a situated a homeowner, making use of a debt reduction program will allow you to get a significant discount on the amount of debt you owe and help get your finances back in order. Although, this will likely have negative credit ramifications, the opportunity cost of paying down debt for less may be well worth it and should be something you should definitely consider.

Stick to the Budget

Make sure you stick to your allotted budget and avoid high APR credit cards! Again, this isn’t always the easiest thing to do since your options can often be limited on a fixed income but it’s important to try your utmost when maintaining a budget. Alternatively, it’s advised that you use cash more frequently or maybe even make use of the envelope budgeting method. With the envelope method you place your cash into different envelopes, by category. So, if your income is $2,500, you place $500 in a grocery envelope, $500 in an auto expense envelope, $1,000 for home expenses, $500 leftover into unexpected expenses, etc. This way you are never spending more than they earn.

Discussing with Family

Finances are always a tricky topic to discuss, especially with family. Often times the best way to introduce this topic of conversation is by talking about how you budget (from a first-person perspective). If you put the topic on yourself initially and speak candidly about mistakes you made first, your family members are a lot less likely to feel shameful/guilty and much more willing to open in regards to your finances. This is a good way to smoothly break the ice and walk into this topic. All people can relate to individuals that have gone through similar experiences—regardless of whether you are family or not!