Financial analysts are waving the flag of caution, because older Americans who are near retirement age have high credit card debt. On December 31, 2018, the Federal Reserve Bank of New York reported that credit card debt is the highest since the 2008 financial crisis.
Overall, Americans owe $870 billion on their credit cards. People age 60 and over account for about 30% of this number, at around $260 billion. This group is either nearing retirement or is already retired. At this stage, debt is the last thing a person should want to have.
Making ends meet to pay ordinary living expenses can be enough of a challenge on a fixed income, without the increased pressure of monthly credit card bills carrying high interest. Imagine having to pay a $500 a month minimum payment on your credit cards out of the typical Social Security check of around $1400. If you are not yet retired, that payment is money that is not going into your retirement savings.
Strategies for Paying off Credit Card Debt
The experts offer several strategies you can use to dig out of debt. These are especially helpful if you are approaching retirement or already retired. The method or methods you utilize, will depend on your unique situation. However, here are some ideas that could help:
- If you are still working, consider putting off retirement so you can pay off your debt.
- If you are already retired, think about taking a part-time job to pay off your credit card balances.
- Do your best to avoid carrying a balance on credit cards in the future. When you use a credit card, you can go online and make the payment through your bank, before you even receive the credit card bill.
- Revisit your budget to make sure your actual cash flow can cover your living expenses, as they fall due throughout the month. If you have enough income each month, but it does not hit the bank before the bills come due, try to rearrange some of the payments to synchronize with when your income arrives.
- After you do the math, if you discover that you have a shortfall, evaluate how you are spending your money. You might be able to cut back on a few things to live within your means.
- Sometimes being frugal is not enough. You might want to think about working part-time on an ongoing basis to have enough income to meet your needs.
- Instead of continuing to work with no foreseeable end in sight, some people rent a room to a tenant for a source of income. A similar option is to convert a shed or other space into a tiny house and rent that out to travelers or a regular tenant.
When paying off your credit cards, there are two different schools of thought. One approach is to pay the most on the card with the highest interest rate. The other strategy is to pay off the smallest balance first, while paying less on the higher balance cards. Getting to see a card quickly reach a zero balance, can be the motivation that keeps you on track to get out of debt.
AARP. “Credit Card Debt on the Rise – Again.” (accessed March 21, 2019) https://www.aarp.org/money/credit-loans-debt/info-2019/credit-debt-rise.html