Over the weekend, Barron’s carried a feature about consumer debt. Some of its conclusions were based on data contained in the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, which were covered in this blog last week.

Barron’s took a fairly rosy view of the situation, commenting: “Look almost anywhere these days, and the data paint a picture of household finances on the mend.” Hmm, maybe. But with unemployment the way it is, and delinquency and default rates still high, it may be premature to be too self-congratulatory. There are plenty of people out there facing unmanageable debt, made worse by crippling credit card rates.

Credit card debt and the elderly

One group that is likely to contain many who are struggling financially is America’s senior citizens. This uncomfortable truth was covered here in October in a blog entitled “Credit card debt increasingly affecting seniors“. But new research published earlier this month by CESI has shed new light on the problem.

It’s important to note one caveat with this study: its research base was significantly smaller than that used by most national polls. But even bearing that in mind, some of its findings are startling:

• Fifty-six percent of respondents had outstanding debts when they retired

• At the same time, 59 percent had saved less than $50,000

• Thirty-five percent still had credit card debt when they retired

• Thirty percent still had a mortgage

Credit card debt–a personal case study

CESI included in its report the story of one woman, Victoria Johnson (not her real name), who may have encountered a situation shared by many. She’s now 65, but when she quit work she bought into a retirement dream that is common across the nation.

She lived well, she traveled, she bought gifts for her kids and her friends. It was the sort of sunny lifestyle that is often portrayed when the media focus on people in their supposedly golden years. And she loved it–right up until she realized that, at $17,000, the balances on her credit cardswere out of control. She explained how she felt at that moment:

I never meant to run up that big a bill. Retirement was fun, I kept saying I would get a part time job to pay it off, but I just never did, and soon it got out of hand. I was embarrassed, ashamed and I felt I was ruining the fun retirement we had planned.

Credit card rates can turn a dream retirement into a nightmare

When USA Today reported the survey, yesterday, one piece of advice it offered to people in that situation leaped off the page: whatever you do, don’t make a late payment on your credit cards. Not only is this likely to give your credit score a knock, but it’s also liable to trigger much higher rates.

According to this site, credit card rates are already averaging 16.77 percent, which is bad enough if you’re relying on so-called high interest savings accounts for much of your income. But a single late payment can instantly bump whatever you’re paying to close to 30 percent on new purchases, sometimes even more. Go 60 days past due, and that high rate could apply to your existing balances.

Published 11/22/10 (Modified 03/24/13)