Mind-numbing numbers
Here's the sobering truth: A credit card balance of $10,000, paid off at $200 a month at the 23.37% rate, would take 15 years and nine months to retire — and cost you an additional $27,745 in interest. This also assumes you don’t put more debt on it.
Yet statistics suggest that retirees are piling up debt rather than paying it down. In its review of data from the Federal Reserve's Survey of Consumer Finances, AARP found that in households headed by people aged 65 to 74, average debt more than quadrupled between 1992 ($10,150) and 2022 ($45,000).
Meanwhile, credit card offerings now extend beyond shopping-related products. Medical credit cards, for example, typically charge a hefty 26.99% APR. That has disquieting implications, given that about 70% of people with medical debt owe $1,000 or more, according to Peterson-KFF.
The EBRI survey respondents acknowledged that they bore some responsibility for their spending situation. Half said they saved less than they needed for retirement given their current economic circumstances, compared to 17% who reported saving more.
But by and large, it’s not sea cruises or shiny new toys driving the debt. Asked to rate their consumption philosophy, just 11% said they had a “spending mindset,” compared to 38% with a "savings mindset." (The remainder were neutral.)
Subscribe to our free newsletter
Get top stories & exclusive content.
Join
our
200k+ community.
By signing up, you accept
Moneywise
Terms of Use,
Subscription
Agreement,
and Privacy Policy.
Three ways to break the credit card debt grip
If you’re caught in the netherworld of 20%-plus interest rates, it’s time to take up some or all of these three strategies for restoring financial control.
Use other forms of credit. If you must borrow, a personal loan carries a much more favorable rate than the typical card. The Fed pegs the average rate on such loans at 12.33%, and a home equity line of credit (HELOC) will often offer even better. Average HELOC rates for a $30,000 line fell to 8.56% as of Nov. 20, the lowest level of the year, according to Bankrate’s nationwide survey of large lenders.
Shop around for better cards. Just because APRs average 23%-plus doesn’t mean all cards charge that much. The global credit reporting and data company Experian offers a list of cards with special introductory offers of 0%. You’ll also want to take a look at cash-back cards, which offer rewards on popular shopping categories including groceries, gas and streaming services.
Free up financial resources to pay off cards. If you have money tucked in a bank account or money market fund, consider using a chunk of that low-interest savings to pay off the high-interest debt — now. You may also want to cut back on continued market investment, as you’ll actually make a far better “return” in many cases by paying off the debt rather than keeping it in your portfolio.
Make your home work harder for you by making the most of your equity.
The average homeowner sits on roughly $311,000 in equity as of the third quarter of 2024, according to CoreLogic. Having access to your home equity could help to cover unexpected expenses, fund a major purchase like a home renovation or supplement income from your retirement nest egg.
Unlock great low rates in minutes by shopping around. You can compare real loan rates offered by different lenders side-by-side through LendingTree.
