- Older Americans are feeling the sting of inflation.
- This is mainly because their share of credit card debt has increased in recent years.
- Since the Federal Reserve has raised interest rates to fight inflation, it has become more expensive to be in debt.
It is becoming more and more expensive for older Americans to take out loans.
This is because last month the
already knows a push.implemented its first interest rate hike of the pandemic to fight inflation, ending a two-year period of near-zero interest rates. Rate increases are expected to last at least through the rest of 2022, and auto loans, mortgages and credit car payments are
Older borrowers, in particular, are able to feel the financial pinch, a new survey by the Senior Citizens League says. 43% of elderly households have credit card debt and 49% of the 3,028 survey respondents said they had spent all their emergency savings or had no savings in February. Older households with credit card debt can face “debilitating financial consequences” as interest rates rise, researchers say.
The share of US credit card debt owed by people over 70 has been growth during the last years; it has nearly doubled since 2010 when it was around 4.4%, to 8.6% now. People over 70 collectively owe $380 billion in credit card debt, more than three times as much as in 2010, when they owed $110 billion.
“Credit card debt in retirement can quickly spiral out of control, and that’s especially true during times when interest rates are rising,” Mary Johnson, Social Security and Medicare policy analyst for the Senior Citizens League, mentioned in a report.
It’s especially hard for seniors, who often live on fixed incomes — more than 40% of older Americans rely exclusively on Social Security for their income, according to a study 2020 by the National Institute for Retirement Security. Even though retirees received the highest Social Security cost-of-living adjustment (COLA) in 40 years, inflation quickly exceeded the annual increase.
“We are in a period of high inflation where rising interest rates will mean that many consumers will have to reduce the amount of debt they are carrying on their credit cards from month to month in order to maintain this manageable cost,” Johnson said.
And that’s when overall credit card debt saw record increases amid historic levels of inflation. Credit card balances hit $860 billion in February, up $52 billion from the fourth quarter of 2021. It was the largest quarterly increase the Fed has seen in 22 years. data collection. The recent acceleration in debt is likely due to the fastest inflation in decades, according to the Fed.