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Retirement should be a time of financial security and peace of mind, yet many seniors find themselves struggling with credit card debt that accumulated over the decades prior, or from unexpected expenses that came about in their later years. Medical bills charged to credit cards, everyday expenses that outpaced fixed incomes and high-rate balances can all cast shadows over what should be golden years.
The challenges of managing credit card debt in retirement are uniquely difficult, too. With fixed incomes and limited opportunities to increase earnings, many seniors face constraints that younger borrowers don’t. The minimum payment trap can be particularly dangerous for retirees, too, as making only minimum payments on significant credit card balances can transform temporary financial solutions into a permanent financial burden.
Fortunately, certain credit card debt relief strategies are specifically beneficial for seniors who need help easing this burden. And, understanding these options — and the possible downsides — may help you find a path to a retirement that’s devoid of the constant stress that comes with high-cost debt.
Explore the debt relief options available to seniors here.
What debt relief options make the most sense for seniors?
If you’re a senior who’s struggling with high amounts of credit card debt, the following options could be worth considering:
Credit card hardship programs
Many credit card companies offer hardship programs specifically designed for cardholders facing financial difficulties, including seniors on fixed incomes. These programs typically reduce interest rates (in some cases dramatically), waive fees and may lower your minimum payments temporarily. And because these programs come directly from the card issuer, they’re typically available with no additional fees to those who qualify.
Other factors to consider: These programs can be helpful for seniors who need a reprieve from high rates and fees, but they typically only last from six to 12 months, may require closing the account, and the eligibility generally depends on specific issuer policies and your payment history.
Learn how to get rid of your debt in retirement.
Debt management plans
Credit counseling agencies offer debt management plans that consolidate multiple credit card payments into a single monthly payment, often with reduced interest rates they negotiate with credit card companies. When you enroll in this type of program, the interest rate and fee reductions can be significant, enabling you to pay off what you owe at an expedited rate while making just one monthly payment. Most plans allow for a complete payoff within three to five years.
Other factors to consider: While a debt management plan can be a smart option, it does require you to close your enrolled credit accounts, typically includes monthly fees to the counseling agency and appears on credit reports — though the impact is generally less severe than other options.
Balance transfer credit cards
For seniors with good credit despite their debt challenges, transferring high-rate credit card balances to a new card with a 0% introductory rate can provide breathing room. Taking this route stops interest accumulation during the promotional period (which typically lasts between 12 and 21 months), allowing all of your payments to go toward the principal.
Other factors to consider: Wiping out interest temporarily can make it much easier to pay off your debt. However, a good balance transfer offer usually requires you to have good credit. You will also typically pay balance transfer fees of between 3% and 5% of the transferred amounts and will need a disciplined repayment plan if you want to get rid of your debt before the promotional period expires.
Credit card debt settlement
By working with a debt relief company or directly with credit card issuers, seniors can negotiate to pay a lump sum that’s less than the full balance owed. This type of approach can reduce your total credit card debt burden by 30% to 50% on average if negotiations are successful, meaning that the strategy could offer big relief to seniors who are simply unable to pay off their debt through other means.
Other factors to consider: This type of debt relief typically requires you to either save up for lump-sum settlements or have access to enough funds to make lump-sum settlement offers. It can also damage your credit (at least temporarily) and may result in more taxable income on forgiven debt amounts.
The bottom line
Credit card debt is particularly toxic for seniors due to high interest rates that can quickly overwhelm fixed incomes, so it’s important to take action as soon as possible. The good news is, though, that seniors have multiple options available to make freedom from credit card debt achievable, even on a fixed income. For many seniors, a combination approach works best — perhaps starting with requests for hardship help before moving to a debt management plan for any issuers unwilling to offer internal relief. For those with severe credit card debt compared to their income, debt settlement could be an approach worth weighing. Whatever route you choose, though, taking action now is the most important step.
