Seniors’ Credit Card Debt: How To Pay
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Published December 14, 2023 | Updated February 22, 2024
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For millions of older adults, growing seniors’ credit card debt is a major source of stress. The mounting costs of housing, utilities, and food add to the burden. For those in the age range of 60 to 69, the average credit card debt is $4,189.
While this may not seem to be a big amount of debt to pay off, the average Social Security benefit is $1,705 per month. For many older adults on a fixed income, this is the only or the primary source of income. For those who have to rely on credit cards to cover the shortfall in their budget due to the rising cost of living, paying off this debt can be a challenge.
How Seniors Get In Debt
Without retirement savings, vulnerable senior citizens may have to deal with budget shortfalls frequently. Many rely on credit cards to keep up with living expenses. In many cases, these senior citizens may be dealing with complex health issues or disabilities that result in large credit card balances.
When you charge things you need to live because your expenses are higher than your pension and retirement income, paying down the debt can be incredibly challenging. With the average credit card interest rate at 24.56%, seniors’ credit card debt is getting more expensive.
The Impact of Credit Card Debt as a Senior
Credit card debt can have a significant impact on the well-being of older adults. The stress of how they’ll manage their expenses while paying down debt may also impact their physical health.
With limited retirement savings, they may feel helpless in the face of growing balance and may miss payments. This can lower their credit score and impact their ability to borrow. If their debt goes to a collection agency, there may be the added stress of collection calls.
In rare cases, overwhelming credit card debt, in addition to medical and other sources of debt, may make it necessary for them to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy.
5 Options To Pay Off Credit Card Debt As a Senior
Although it may seem unsurmountable, it is possible to pay off seniors’ credit card debt through careful budgeting, a feasible payment plan, and debt relief measures.
1. Create a Budget and Prioritize Payments
When it comes to seniors’ credit card debt, creating a budget is a great place to start. A budget will help you see where you’re spending money, which will allow you to reduce spending in some areas.
A budget will also help you determine how much money you can pay towards debt each month so you can create a repayment plan. Once you have a clear picture of your financial situation, prioritize payments based on their interest rates. Pay off credit cards with the highest interest rates first to save the most on interest charges.
2. Consider Debt Consolidation
Debt consolidation doesn’t eliminate your debts, but it allows you to combine multiple debts, such as personal loans and credit card balances, into a single loan. It can help make your debt easier to manage, reduce your monthly payments, and help you secure a lower interest rate if you have good credit.
You can take out a debt consolidation loan to pay off credit cards, and if you’re able to secure a lower interest rate compared to what you’re paying on credit cards, it can help you pay off your debt faster.
Another option is a balance transfer credit card if you have excellent credit and can qualify for a 0% APR. If you can pay off your balance during the 0% APR promotional period, 100% of your payments will go toward your principal, not interest.
3. Consider Debt Settlement
With debt settlement, you can work with the credit card company to negotiate your debt and pay less than what you owe. You can work with a debt relief company to negotiate on your behalf. This debt relief strategy can help you save as much as 50% before fees if you’re working with a debt settlement company and willing to offer a lump sum payment.
Teresa Dodson, debt expert and founder of Greenbacks Consulting, believes debt settlement can be an effective option for senior consumers. “Most seniors, depending on their financial situation, just need to worry about housing, food, and medical bills. If they become unable to afford paying credit card bills and have trouble keeping up with the basic necessities, debt settlement is a great option,” Dodson shares.
If you’re six months past due on your credit cards and don’t think you can continue making debt payments, settling your debt can be worth considering.
4. Look for Government Assistance Programs for Seniors
While you can’t get direct government help with credit card debt, you may qualify for senior assistance programs that can reduce your living expenses. This will free up money in your budget that you can use to pay off seniors’ credit card debt.
For example, you may qualify for food allowance, grocery stimulus, or SNAP benefits, which will allow you to reduce your grocery expenses. You may also be eligible for Medicare programs, which can bring down your healthcare expenses.
5. Get Help From Non-Profit Organizations
You may also be able to get ongoing financial help through nonprofit credit counseling agencies and organizations like Financial Empowerment Centers. You can find an FEC center in your entre to receive free financial counseling.
Qualified counselors can help review your budget, prioritize your financial obligations, and pay off your debts. This can be a great first step in paying off seniors’ credit card debt.
How To Avoid Credit Card Debt as a Senior
While it’s possible to pay off credit card balances even as an older adult, it’s ideal to avoid it in the first place. We recommend following these tips to prevent debt from accumulating.
Plan Your Budget
Budgeting is the key to avoiding debt and practicing good financial management habits. Create a budget each month to have a clear picture of your income and expenses. This will allow you to identify areas where you can reduce expenses.
With a tighter budget, budgeting is even more important because it may help you avoid relying on credit cards to pay for things you may not need.
Build an Emergency Fund
Unexpected medical emergencies and other expenses are the biggest reason why so many seniors fall into the credit card debt trap. Setting up an emergency fund can help you avoid relying on credit cards to pay for things like car repairs, unexpected medical bills, or other expenses.
Seek Financial Advice
Getting financial advice from a professional like a credit counselor can be a great way to create a tangible plan to achieve your financial goals. Whether you want to ensure you have enough saved for a comfortable retirement or want to learn how to manage your debt better, sometimes it's better to seek professional help instead of trying to do it on your own.
Manage Your Credit Card Debt as a Senior
Once you make a plan to pay down seniors’ credit card debt, it's important to avoid racking up the balance again. If you’re finding it challenging to afford daily necessities like groceries, utilities, or medicine, take advantage of government benefits for seniors.
Credit card debt isn’t the end of the world, and there’s a wealth of resources, tools, programs, and benefits available that can reduce your financial burden.