Debt Levels Double for Older Americans

Category: Credit Card Debt
Published: Thursday, 25 February 2016
Written by Super User

Older Americans have more than doubled their amount of debt over a dozen years, and many of them make ends meet by forgoing home or car repairs and cutting medications in half, according to a new report by the National Council on Aging.

"We need to recognize that debt is a problem among this population, and help prepare older adults to better manage their future medical, housing and other daily expenses as they age," Maggie Flowers, the council's associate director for economic security, said in a statement.

The council looked at government figures on the debt levels of households headed by adults age 60 and older as of 2013. Among the findings:

  • The median total debt has more than doubled from $18,285 in 2001 to $40,900 in 2013.
  • One in 25 households had a negative net worth, meaning their liabilities surpassed their assets. In 2001, 1 in 50 had a negative net worth.
  • More households carry credit card debt and more of it. Nearly one-third of households owed money on a credit card -- up from just over a quarter of them a dozen years ago. And the median credit card debt over that time doubled to $2,450.

Mortgage loans make up the largest slice of debt among older consumers, as homeowners over the past decade have taken advantage of historically low interest rates to refinance and tap the equity in their houses, says Lori Trawinski, director of banking and finance at the AARP Public Policy Institute.

Borrowers typically don't take out loans that they don't expect to repay, although unexpected setbacks such as an illness or the loss of a job or spouse can make that debt unmanageable, Trawinski adds. And the older you are, the harder it is to overcome these setbacks, she says.

The council surveyed some professionals who work at senior centers, Area Agencies on Aging and other agencies to find out what trade-offs older consumers are making to manage their debt. Many report that seniors forgo needed home or car repairs, cut pills, avoid social engagements, skip medical appointments and meals, and miss rent and mortgage payments to try to make ends meet.

The council offers two online services to assist seniors. The EconomicsCheckUp can help older adults reduce debt, find work and cut spending, while BenefitsCheckUp posts information on federal, state and local benefits available to lower-income households.

AARP also offers online calculators to help with budgeting and managing debt. And AARP's Work amp; Jobs site can help with a job search.

Photo: TimArbaev/istock

The Average American Is in Credit Card Debt, No Matter the Economy

Category: Credit Card Debt
Published: Thursday, 25 February 2016
Written by Super User

Most Americans are card-carrying members of a club in which the card is actually the problem.

At the end of 2015, the Federal Reserve released data on American credit card debt (this is called revolving debt, because you dont need to reapply for the loan), and the total came to $935.6 billion. As Bloomberg Business notes, this is number has grown $100 billion since 2011, but its still less than the $1.02 trillion Americans owed in 2008 before the financial crisis occurred. On average, an American between the ages of 18 and 65 has $4,717 of credit card debt.

According to, the average credit cards interest rate is 15%. At the minimum payment of $189, itll take 10 years and a month to pay off that $4,717. The total payments would amount to $22,869. Thats a $18,155 cost for a very small loan.

American credit card borrowing may not be at its peak, but its still extremely high, and even more concerning is that the numbers dont seem to change very much over time. When the economy is hurting, borrowing is high. When the economy is booming, borrowing is also high. And no matter the situation, Americans seem to have credit card debt.

The Boston Fed recently released a study examining American credit card debt, and shed some light onto American credit card borrowing and why its so pervasive.

The biggest reason for such high debt, the study found, was high availability of credit. When someone is offering you credit, its hard to say no. Available credit appears to be the driving factor of debt in both the short and long term, the study says.

Only 35% of credit card users dont carry a balancethey pay off their bill every month, like youre supposed to. They use credit cards for convenience, and perhaps to generate bonus points and rewards, not because they need to borrow. If youre a member of this group, youre known as a convenience user. (Go ahead and pat yourself on the back for not being on the hook for high interest rates, but dont gloat.) The other, more typical credit card users are known as revolvers because they dont pay off their bills in full so the debt revolves. To them, credit limit increases are essentially invitations to spend more. Its unsettling: for revolvers, a 10% increase in credit is followed by a 1.3 percent increase in debt within one quarter and a 9.99% increase in debt over the long term, the study found.

Best Strategies For Paying Off Holiday Credit Card Debt

Category: Credit Card Debt
Published: Thursday, 25 February 2016
Written by Super User

According to the most recent Gallup poll, about half of all American credit card users will carry a balance on at least one of their credit cards at some point in the year. For many people, the holiday season is synonymous with both overspending and credit card debt. Paying off your holiday debt as soon as possible will save you money on interest charges while sparing you the stress and emotional toll of carrying around debt each month.

Creating a strategy for paying off holiday debt

The most important strategy to pay off holiday debt is to have a plan. Too many Americans in debt make the mistake of avoiding confronting their unpaid balances and changing their personal finance behavior to pay it off.

The first step towards creating a strategy is to take an inventory. Start by adding up all of the accounts where you owe money, taking note of the interest rate for each account.  Its also a good idea to check your credit score to see where it stands in light of any newly acquired debt. Fortunately, many credit card issuers now offer customers a free monthly credit score.

Obtaining an interest-free balance transfer offer

If your credit score is considered to be good (700-749), or excellent (749-850), then you should consider applying for a credit card with an interest-free promotional financing offer for balance transfers. These offers allow you to take a break from paying interest charges for a limited time. By law, these offers must last at least six months, but the most competitive offers can last as long as 21 months. Once the 0% APR promotional financing rate expires, only then will the standard interest rate apply to any unpaid balance. There is no annual fee for most cards with these offers.

In most cases, these offers will require the payment of a 3% balance transfer fee, but there are some exceptions. For example, the Chase Slate card offers 15 months of interest-free financing on both new purchases and balance transfers, with no fee for transfers completed within 60 days of account opening. Another example is the Capital One QuicksilverOne card, which offers 0% APR on new purchases and balance transfers for nine months. There is no balance transfer fee for this offer, but there is a $39 annual fee.

If you are looking for the longest duration in a promotional financing offer for balance transfers, then you should consider the Citi Simplicity or Citi Diamond Preferred cards. These cards both offer 21 months of interest free financing on both new purchases and balance transfers, with a 3% balance transfer fee. The Simplicity card features no late fees or penalty interest rate, while the Diamond Preferred offers additional travel insurance and shopping protection policies. There is no annual fee for either card.

Utilizing an interest-free balance transfer offer

Obtaining an interest-free balance transfer offer is only the first step, and its important to utilize this offer in the most efficient way possible. While cardholders are only required to pay the minimum balance each month, it is a good idea to pay much more, even with an interest-free offer. In fact, the best advice is to pay off enough each month to ensure that the entire amount is paid off before the promotional financing period ends.

When these offers are used to pay off debt as quickly as possible, they can be quite effective. By allowing 100% of the payment to go towards the repayment of principal, cardholders can retire their debt much sooner than they could have otherwise. But when cardholders use these interest-free financing offers to postpone repayment rather than to encourage it, they are setting back their efforts to pay off their debts. Unfortunately, some even use these offers to procrastinate under the assumption that they will qualify for another promotional financing offer in the future.

Other strategies for paying off holiday debt

Beyond interest free promotional financing offers, there are ways to pay down debt more quickly while minimizing the interest that you pay. First, its important to always make payments towards the balance with the highest interest rates first. In addition, its important to realize that credit card interest is incurred based on the cardholders average daily balance, so each day that you wait to make a payment is a missed opportunity to reduce your interest costs.

For example, there is no reason why you cant make multiple payments each month as the money becomes available to you. This is called making micropayments. In fact, there is no limit to the number of payments that can be submitted each month, and each one will contribute to paying off your debt while reducing interest costs.

Finally, its always worth contacting your card issuer and asking for a lower interest rate. When you have a strong record of on-time payments, card issuers are sometimes willing to lower your standard interest rate.

By taking every possible opportunity to pay down your holiday balances, you can pay off your debt sooner than you might have thought.

How to Wipe Out Credit Card Debt

Category: Credit Card Debt
Published: Thursday, 25 February 2016
Written by Super User

Digging out of credit card debt can seem like an impossible task at times. If you feel like youre drowning, dont despair. Youre not alone in your struggle with debt. The average household in the United States has more than $15,000 in credit card debt and roughly $129,579 in total debt. However, you dont have to spend the rest of your life living with crippling debt. Here a few things you can do that may help you get your finances back on track and regain your peace of mind.

Start by paying down the credit cards with the highest interest rates. Bankrate has a handy debt payoff calculator that can assist you with tracking your goal. If you tend to get discouraged easily and would like to see quicker results, another option would be to try the debt snowball method. This involves paying down the credit card with the lowest balance first. That way, youll start to see some of your smaller debts disappear quickly. The only drawback is that you will end up paying more interest on all of your debt in the long run, since you wont be tackling those higher interest cards first.

Another money move worth making is contacting your credit card issuer and requesting a lower interest rate. A study found that two out of three cardholders who ask for a lower interest rate have their request honored. So reaching out to your credit card issuer is worth a try. Know, however, that your request might not be granted if your account is not in good standing. Customers who pay their bills in full and on time, every time, are more likely to be able to negotiate better terms.

If you want to make a significant dent in your debt, youll need to develop a budget. A realistic budget will provide you with a clear picture of how much money is coming into and going out of your household. Once this new perspective is gained youll be able to see where you can cut back on your spending and find extra money to put toward your credit card bills. Budgeting tools are a great way to stay on top of your debt-repayment efforts. Two budgeting tools to consider are Mint and Buxfer.

Another key to chipping away debt is to keep tabs on your spending. If you spend as much as or more than youre paying off, youll have a difficult time reaching your financial goals. Avoid making an impulse purchase by unsubscribing from email newsletters for your favorite stores and staying out of the mall until youre closer to paying off your debt.

Make more than the minimum  payment on your credit cards. Sending in the minimum required payment will just prolong the debt repayment and result in more interest payments over time. If you can, send in a double payment each month. Putting more money toward the interest will help you quickly lower your balance.

You can also consider a balance transfer or debt consolidation. Transferring a balance to a credit card with 0% interest can be a good way to help you pay your debt in less time. Consolidating debt can also be a good move when you have several debts to pay and you need help managing your payments. If you need assistance with overwhelming debt and you dont feel that youll be able to keep up with payments, call your credit card issuer and let them know you are experiencing financial difficulty. Its also a good idea to get in touch with a certified credit counselor. The National Foundation for Credit Counseling has a directory of certified credit counselors who may be able to help you create a debt management plan so you can regain control of your debt.

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