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For Seniors, Rising Credit Card Debt Squeezes Tight

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The Great Recession hit Shirley Green hard. The 65-year-old had moved to Florida from Denver during the housing boom, but she lost her home when the real estate bubble burst. She filed for bankruptcy.

“I started getting credit card offers and thought I should start rebuilding my credit score,” she explains. When she faced medical problems, she paid for the expenses with credit cards. Now a retiree, she finds herself back in Denver with more than $20,000 in credit card bills, mostly from medical debt, and fending off debt collectors.

If you’re a senior struggling with credit card debt like Green, you’re not alone. In 2012, for the first time, middle-income households headed by someone over 50 years old carried more credit card debt on average than households of people younger than 50, according to the Demos National Survey on Credit Card Debt conducted with AARP’s Public Policy Institute. Half of those over 50 had medical debt on their credit cards, and a third said they used credit cards to finance daily expenses.

“It’s not uncommon for people to get in over their heads,” says Bruce McClary, vice president for communications at the National Foundation for Credit Counseling. “But it’s harder for seniors. They can’t generate income from other sources to pay it off.”

The stress of owing money can be hard to bear, but you have options for easing that burden, including working with creditors or using savings.

» MORE: Getting out of credit card debt

Why debt has grown

Seniors have credit card debt for a range of reasons. They may still be paying off school loans — theirs or their children’s. Or they may have not saved enough for retirement and rely on credit cards for basic expenses. What’s more, debt can keep seniors from being accepted into an independent- or assisted-living facility.

Many seniors carried credit card debt into retirement. “It may have been manageable while they were working, but now it has become a burden,” McClary says. Their income levels drop significantly from full employment to retirement, and now they have to rely on other resources that are finite.”

Medical debt compounds the problem. When Green faced some medical problems, her health insurance covered only a portion of her expenses. She put medical charges on her credit card because she thought she could handle it. But more medical issues arose, and “everything mushroomed,” she says, putting her deeper in debt. Now she’s hoping credit counseling can help her.

“The medical bill by itself does not come with an interest rate,” McClary says, “but if you put it on a credit card, you’re adding to the cost with credit card interest.” He says that recently credit counselors have seen medical debt being transferred from the medical providers to debt collectors much faster.

Another way seniors may fall into debt trouble is by giving financial help to adult children or grandchildren. McClary says before giving money, seniors should ask themselves how they want to help their children. “If you open a credit card and max it out, fixing their problem for the short term, you’re positioning yourself to be a problem to them in the future.”

What to do

If you’re in debt trouble, here are some steps you can take to help your situation.

  • Find a nonprofit credit counselor to help with your situation. Debt counseling can be done on the phone. The sooner you seek help, the better.
  • Contact your credit card issuer to see if you can work out a plan. Most issuers have hardship or forbearance programs for distressed customers. “It’s much easier to work with them than a debt collector,” says McClary. “Many creditors can find a way to get you into a product with lower payments and more manageable terms.”
  • Tap your savings to pay off high-interest debt. This seems like an obvious solution, but sometimes people are afraid to lose the savings safety net.
  • Adjust your lifestyle. Belt-tightening isn’t pleasant, but saving money on high monthly expenses such as cell phonescable TV or internet service will give you more money for paying down debt.
  • For medical debt, talk to your medical provider to see what your options are. Often they have assistance plans. And avoid the medical credit cards that may be offered by your provider. These charge very high interest rates, regardless of your credit score.
  • If your adult children are asking for financial help, encourage them to talk to a nonprofit credit counseling organization. You can find one in your area through the NFCC website.
  • Consider a reverse mortgage. There are many risks and benefits to using your home to help you through difficult financial times. If you go this route, be sure this will solve your problem and not just add to your financial troubles.

Ellen Cannon is a staff writer at NerdWallet, a personal finance website. Email: ecannon@nerdwallet.com. Twitter: @ellencannon.