Today's retirees, children of the Depression who grew into the Cash Only Generation, are rapidly joining the ranks of Americans who owe their souls to Visa, MasterCard, and American Express.

For the first time in their lives, some seniors are dealing with managing mounting credit card debt and, in the worst case scenarios, filing personal bankruptcy. This age group has a higher percentage of their overall debt attributed to credit cards, as they are more likely to have their houses and cars already paid off. Credit cards, unfortunately, tend to have higher interest rates than mortgages or car loans, so these balances will take even longer to bring down.

According to Cardweb.com, an Internet site that tracks the industry, there are 1.2 billion cardholders out there, and they're sitting on $650 billion in debt. Last year, 1.3 million of them filed for bankruptcy.

While seniors still represent a small percentage of their clients, the South Florida offices of the nonprofit Consumer Credit Counseling Service has seen the number of seniors they serve double this past year. About 10 percent of those they serve are people age 65 and older, as compared with less than five percent a year ago, notes Jessica Cecere, president of the service's Palm Beach County and Treasure Coast region.

In 1992, 35 percent of retirees had debt, Cecere says.  Statistics from SRI Consulting Business Intelligence in Princeton, N.J., shows that number increased to 59 percent in 2000. Among those who did have debt, the total for households age 65 and older grew from $8,000 per household to $23,000 over that same time period.

How did seniors get themselves into the same pickle as younger consumers?

People have different reasons at different ages for spending more than they can afford. And those in their 60s and beyond are more likely to be stuck with increasing out-of-pocket medical expenses. As another example, older adults have seen a severe decrease in their incomes, which are more likely to be dependent on safer but lower-yielding securities like certificates of deposit, due to the economy's downturn.

So, what can be done?

  • Do a careful accounting of all your debt, excluding your mortgage, but including your car payment. If it's more than 20 percent of your total income, you've got a problem.
  • Professional credit counseling can help, especially if you are a person with a lot of debt, or someone inexperienced in handling your finances. But choose someone wisely, going with one that has been around for years and that doesn't ask for substantial fees. Many less-reputable credit counseling companies now are hiding behind similar-sounding names or a nonprofit status.
  • A reverse home equity mortgage, available only to seniors, is a possible way to pay off credit card debt, but proceed with caution. On the one hand, you're exchanging a high-interest credit card payment for a lower interest mortgage payment. However, keep in mind that you put your house on the line when you take out a reverse mortgage.

The National Consumer Law Center advises that home-secured credit cards, or those that allow you to charge against your home equity, are almost always a bad idea, as are home improvement contractor credit deals that often don't give the best interest rate.For more information, go to the National Consumer Law Center's Web site at www.nclc.org or the Consumer Credit Counseling site at www.cccsinc.org, or call 800-330-2227.

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