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Older & Poorer
Susan Jaffe, The Plain Dealer
March 5, 2004
They are known as a generation used to paying cash, but now some seniors are barely surviving on credit.
After a 72-year-old couple struggled to pay for cancer treatments with 16 credit cards, a Cleveland credit counselor is advising them that bankruptcy is their only way out of debt.
A retired Mentor couple, in their late 60s, assumed their biggest financial worries were finally over after putting four children through college and making the last mortgage payment.
Four years into retirement, after a combined 75 years of work, they, too, are filing for bankruptcy.
"You've paid all your life, this isn't easy," she said, starting to cry. "This isn't how I was raised."
Mounting consumer debt and bankruptcies among seniors are becoming more common, say Ohio consumer credit counselors, bankruptcy lawyers and researchers.
The average credit card debt among Americans 65 years and older more than doubled, to $4,041 between 1992 and 2001, according to a study released last month by Demos, a public policy research group in New York City.
Using national data from the Federal Reserve Bank's Survey of Consumer Finances, the researchers also found that seniors between 65 and 69 years old - probably recently retired - saw almost a tripling in their credit card bills, to an average of $5,844.
The survey is conducted every three years and is based on interviews with nearly 4,500 Americans. The most recent one was completed in 2001.
The combination of a fixed retirement income, rising living expenses, serious illness or high prescription drug bills can wreck a senior's precarious financial security.
And one day a credit card offer comes in the mail. And then another.
They're not charging vacations or impulse purchases, said Tamara Draut, an author of the report and director of Demos' economic opportunity program. "They're charging prescription drugs and groceries."
The report also found:
Roughly three out of every four Americans over 65 hold credit cards. Nearly one in three carried debt in 2001.
Among seniors with incomes under $50,000, about one in five families spend over 40 percent of their income paying credit cards, mortgage and other debts.
The average credit card debt for women over 65 living alone increased by 48 percent during the same period, to an average of $2,319.
Credit card companies have flooded the market and targeted the elderly, Draut said.
"Once you get behind, you try everything to stay afloat," said Casey Primer, who is 77 and lives in North Royalton. After suffering an aneurysm, he used credit cards to maintain his remodeling business when he couldn't work.
"Everyone has pride," said Primer.
"They think, 'This won't happen to me'."
Although he has unpaid credit- card bills, he still receives offers for new cards.
"If I was younger, it would be a different story," he said. "If I was working, I could pay."
The Mentor couple borrowed from one credit card to pay the other.
Soon they had 20 credit cards and owed close to $90,000. Their monthly minimum payments covered the interest charges while the card balances never budged.
"It was just a mess, and it just piles up and up," said the husband.
He and his wife agreed to discuss their situation only if their names were not used. They don't want their friends to know what has happened to them.
They charged car repairs and home maintenance, and helped out a son and his family when the son was hurt in an accident and couldn't work.
And as their bankruptcy lawyer finished the paperwork last week, they received offers for two more credit cards. One even contained three blank checks in their name promising instant cash.
A spokesman for Bank One Corp. in Columbus, which has more than 50 million credit cards in circulation, said the company extends credit to customers based on a variety of factors.
But gender, age, race or background are not taken into consideration, said Jeff Lyttle.
"Any business wants customers who have an ability to pay," he said.
"It's counterintuitive to say we would reach out to a customer who cannot pay their debt."
Families need to be aware of aging parents who may not be able to manage credit, he said, and "need to be sensitive to the possibility of it spiraling out of control."
"Whether to charge prescription drugs or sign up for the eighth credit card, it was a decision made by a customer that led to that situation," he said.
But cardholders may not always recognize what is happening, said Andrea Price, who heads the Older Persons Law Office of the Cleveland Legal Aid Society.
Price said the bank or credit card company may not tell seniors that the minimum monthly payment may not be applied to the principal and may not even cover all of the monthly interest.
Sometimes the interest charges can push the monthly charges over the maximum credit limit, and that triggers extra fees or late fees.
Ironically, if cardholders make regular payments, they'll earn a good credit rating, said Victor Russell, a certified credit counselor with Consumer Credit Coun seling Service in Cleveland, who advised the couple with 16 credit cards.
"We couldn't put together a payment plan that was affordable because of their lack of income," Russell said of the couple. Declaring bankruptcy was their only alternative.
In addition to struggling to pay for health care, Russell said the counseling service sees an increase in seniors accumulating debt because they're using credit cards to help support their children or grandchildren.
Cleveland bankruptcy attorney Mark Knevel has also noticed an increase in seniors going into bankruptcy.
"And they come from a generation in which bankruptcy was taboo," he said.
When Knevel completes the bankruptcy filing for the Mentor couple, they plan to avoid credit cards, even if it means finding another way to pay for mail-or dered medicine that requires credit card payment.
"I just don't want to see another credit card," said the wife.
"And I will kneel down and thank the good Lord when this is all over."
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