There’s an ugly trend in the world of consumer credit card finance: Senior citizens are going bankrupt because of their dependence on credit cards. What’s behind this trend, and what steps can seniors take to avoid the perils of plastic?
The story begins with a disturbing yet thorough study from John Pottow, a professor of law at the University of Michigan. The study says that bankrupt seniors typically have almost twice as much credit card debt as younger consumers.
Pottow pegs the numbers as follows:
Demographic Average Credit Card Debt
Bankrupt Seniors (Over 65) $27,213
Bankrupt Consumers (Under 65) $15,499
Pottow’s study reveals that 66% of older Americans who enter into bankruptcy blame high credit card debt, compared to 35% of younger consumers who say the same thing.
Another interesting fact from the Pottow study is that seniors are reluctant to deal directly with credit card companies to work out a deal to pay off their debts. Only 37.8% tried reaching out to card issuers, who are usually amenable to working out a payoff plan with delinquent cardholders. Younger consumers seem to more savvy about dealing directly with card companies – 60% of them have approached a card issuer over their debts.
“The findings are both striking and ominous,” writes Pottow. “While multiple factors, such as health problems and medical debts, contribute to elders' financial distress, the dominant force appears to be overwhelming burdens related to credit cards. Elder debtors carry 50% more credit card debt than younger debtors, and they cite credit card interest and fees as a reason for their bankruptcy filings 50% more frequently, results that are highly statistically significant.”
Pottow’s research shows that seniors are more likely to lack access to other forms of credit, are less likely to discuss their financial problems with their adult children, and suffer from “fixed income syndrome" that prevents them from staying on top of fee increases and higher interest rates.