Ally or Enemy?: Too Often Credit Cards Are Enemies

Ally or Enemy?: Too Often Credit Cards Are Enemies


Statistics on retirement savings in the USA are fairly disturbing. There are many who have already reached retirement without the means of living a comfortable life. Many more are within years of reaching retirement and are in no better position. The Social Security benefits, even for someone who has worked all their lives are insufficient to provide comfortable retirement. If anything those benefits will reduce rather than increase unless Congress has a change of heart and is prepared to sanction extra taxation. As if this picture was not bleak enough the level of credit card debt in the generations from middle age into retirement is truly worrying. The interest rates being charged are penal when money is tight.

Debt Problems

The average credit card debt in a USA household id $5,700 with that figure jumping a few hundred dollars amongst those just past 65. It is only in the age group of 75 and upwards that the figure drops again. The problem is that they are paying a high rate of interest on their balances when the monthly benefits they are receiving rarely reach much above four figures. The minimum payment required by card companies each month is taking a sizeable slice and the prospects of paying off the balance are remote. The obvious advice for those still working is to get a personal loan at a lower interest rate or with no credit to pay off any balance in full and pay back that loan in monthly installments.

A recent report by the National Council of Aging identifies credit card debt as only just behind Medical Bills in significance and ahead of the ability to meet utility bills. No one can expect the problem to simply disappear. If the balance can be paid off by a personal loan then that is a course of action to investigate and take.

A Drain

Any debt incurring high interest is draining. If you are in the position described and perhaps have three or four cards as many people in the USA have then you should look at the levels of interest you are being charged. Look at the most expensive one you use and prioritize paying off the balance.

There are some things that you can do to help yourself:

  • Credit card terms and conditions vary as do the rates of interest charged for different kinds of transactions. There is interest on simple purchases which is different from the rate on balance transfers or cash back. You must aim to pay more than the minimum payment the card company requires where you are paying high interest. If you don’t you will see that your balance hardly falls once interest is applied to the remainder. The extra you pay will be allocated automatically to the part of the balance being charged as the highest rate.
  • Fees add to your debt and there are direct costs relating to late payment. Even if you are a day late they will apply so you should arrange auto payment unless you are really well organized and will always remember due dates.
  • When you are offered rewards for using your card then take them as soon as you can in case the promotion ends and you lose them. You are paying enough for the privilege of using your card if you are keeping a balance so take everything you can in return.

Your credit card can be an ally or an enemy; it is up to you and your self-discipline. When looking at the level of debt that retired people still seem to have too many clearly are finding their cards are enemies. Perhaps their cards are saviors at times when money is short and the next benefits’ check is a few days away but the problem then is that the balance increases. The minimum payment next time around will increase and the amount of available credit reduces. In the worst cases card users reach their credit limits and often the card can no longer be used. It is a serious problem for those on limited income. In the last few years before retirement it is essential that card balance are reduced or better still paid off in full. The alternative is a future of financial worries.