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Credit Card Debt Is Soaring Among Retirees

retiree credit card debt

Over two-thirds of U.S. retirees had outstanding credit card debt this year, marking a substantial increase from previous years, according to data from the Employee Benefit Research Institute (EBRI).

This increased dependence on credit cards is an alarming trend given the fixed budgets many seniors live on. According to the survey, roughly 83% of retirees were collecting Social Security, which, on average, accounted for about half of their income.

After pandemic-fueled inflation, costs have not cooled significantly this year. Many retirees are still struggling with higher rent payments and the rising cost of everyday essentials. While Social Security payments have included cost-of-living increases, in many cases these adjustments haven’t been enough to keep up rising expenses.

To bridge the gap between their Social Security income and living costs, retirees have increasingly relied on credit cards. Just a few years ago, only 40% of retirees carried credit card debt, according to EBRI.

Covering Budget Shortfalls

The increased reliance on credit cards to cover budget shortfalls isn’t limited to retirees. Separate research from the Federal Reserve found that consumer credit card debt skyrocketed above $1 trillion, with delinquencies also on the rise.

As consumers age, many carry this debt into retirement. According to CNBC, U.S. retirees that are just reaching retirement are more likely to have debt—and at higher levels—compared to past generations.

A Pressing Concern

In addition to inflation, consumers of all ages are facing high interest rates. As rates have risen, so have credit card annual percentage rates, making credit cards an expensive way to borrow.

The combination of inflation and high interest rates has put immense pressure on consumers and could have repercussions for financial institutions. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, major financial institutions are required to undergo stress tests to assess how they would respond in the event of an economic catastrophe like the financial crisis.

This year’s stress tests revealed that consumer credit card losses would amount to $175 billion, the highest among all lending segments. Since there is still uncertainty about the trajectory of the U.S. economy, this continued reliance on credit cards among consumers should be a pressing concern for banks.

The post Credit Card Debt Is Soaring Among Retirees appeared first on PaymentsJournal.

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The Local Luminary is your dedicated guide to uncovering the stories, strategies, and successes of standout local businesses. With a passion for community growth and a knack for highlighting what makes businesses thrive, The Local Luminary connects you with actionable insights to boost your own business visibility and growth.

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The Local Luminary
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