6 Credit Mistakes Retirees Make | BankingMagazine.net
While children and adult offspring often look to their elders for wisdom, not all seniors are the best source for financial advice. In fact, according to Bankrate.com, credit card debt is growing fastest among seniors.
A recent survey by CESI Debt Solutions in Raleigh, N.C. revealed that nearly 40% of seniors who have accumulated debt in their retirement years are not worried about paying off the debt during their lifetime. The survey also found that 56% of retirees had outstanding debt when they stopped work. Another survey found that bankruptcy filings by seniors age 65 to 74 rose by 178% between 1991 to 2007, even before the recession hit. While digging themselves so deep into debt that bankruptcy becomes necessary represents an extreme level of credit mistakes that retirees make, seniors can make less dangerous mistakes that will still impact their finances. Here are some retirees credit mistakes that you should avoid. (To learn more, see Boomer Bankruptcy Strains Retirement Living without a credit card at all can be difficult, since credit cards simplify online purchases and travel. The most responsible use of credit cards is to pay the balance in full each month. But seniors tend to use credit for everyday expenses in order to supplement their fixed income, which can lead them into further financial trouble if they cannot make their credit card payments. The CESI survey found that 75% of seniors incurred debt for medical or funeral expenses.
2. Not Choosing the Right Credit Card Seniors who decide they need at least one credit card should carefully consider how they will use the card before applying. If you have credit card debt now and want to pay it off, apply for a balance transfer card. But be careful. Some seniors have reduced the value of their transfer by paying a high fee for the transfer which just adds to the debt. Others have found that the introductory period is too short for them to pay the debt in full, so they end up paying an even higher interest rate after the intro rate ends.
If you know you will need to carry a balance in order to repay your current debt or anticipated spending, consider a low interest rate credit card. Some seniors have been burned by cards with a short-term low interest rate followed by a high interest rate, so be sure to read the fine print and know how long the rate will last. Also, try to avoid paying an annual fee.
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