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The Ohio Department of Aging

Ohio Department of Aging Boomerang: It all comes back to you!

Boomerang: It all comes back to you!

My Future - October 2010

Get smart about credit
You may not be able to avoid it, but you can use it responsibly

"Well, we did not have credit cards or direct deposit, so our Parents (both of whom worked) were paid in cash, and then at home we had envelopes for rent, gas, electric, phone, groceries, insurance and, finally, savings. That lasted through the war years. The rule was 'you don't need it unless you can pay cash for it.'" - John Batista, Dayton

"My Dad worked every day, and even though his wages were low, we managed to live within whatever he brought home and were not allowed to incur any indebtedness. Nothing was ever charged. If there wasn't cash to pay for something, we just lived without it. My Dad hated debt worse than anything else in life. His mortgage on the new house was about $4,000, and to him that was astronomical." - Mildred Malare, age 91, Toledo

"Groceries were cheap, if you had money. Stamps were three cents. No food stamps, no government aid, no McDonald's, etc. And thank God, no credit cards." - Wilma Blasiman, age 88, Lake Milton

Credit card use by older individuals is at an all time highThese are just a few of the thoughts about credit and debt that were submitted to the Department of Aging's 2009 Great Depression Story Project by Ohioans who lived through one of the most significant economic downturns in American history. Yet, today, credit card use by older individuals is at an all time high. According to a 2007 report by Demos, a public policy research group, the average credit card debt among people age 65 and older rose 194 percent, from $1,669 in 1989 to $4,906 in 2004. Those between ages 55 and 64 saw a 121 percent increase in debt to $5,916.

This trend isn't symptomatic of folks ignoring the lessons of time. Debt counselors say older adults are using credit cards to charge necessities, like prescription drugs and groceries, not splurging on luxuries. Researchers predict that this trend will continue as more people age 50 and older are still making mortgage payments, making them vulnerable to any other problem, including an illness, loss of a job or an adult child or grandchild who needs significant help.

Some would argue that credit and debt have become an unavoidable part of modern life. While using credit can be convenient, Bankrate.com reports that a typical credit card purchase ends up costing 112 percent more than if cash had been used - that's more than double! Thus, it's important to understand how credit works and be smart about how to use it. Here are some tips from the American Bankers Association:

  • Read the fine print on the credit application. Pay close attention to interest rates, credit limits, grace periods, annual fees and terms, and compare them across companies to pick the one that will work best for you.
  • Always pay at least the minimum amount due to avoid late fees and interest rate hikes. If you can pay more, do. Similarly, pay your bills on time. Late payments can affect your credit rating and increase your balance. If you can't make the minimum payment, or can't make it on time, contact your creditor as soon as you can. They often will work with you to create a more manageable payment plan.
  • Know that nobody can "fix" your credit report. The only way to do that is to maintain a positive payment history over time.
  • Review your credit report annually. Your credit evaluates you as a borrower and needs to be accurate. For a free copy of your credit report, visit www.annualcreditreport.com.

Unfortunately, over-use of credit is one of the leading causes of bankruptcies, and the fastest-growing group of bankruptcy filers in the United States is adults age 55 and older. They accounted for nearly a quarter of the more than one million Americans who filed for personal bankruptcy in 2007, an AARP study reported. If your debt is too much to handle, consider a non-profit credit counseling service. A counselor will examine your situation and work with you to develop a spending plan - usually with a small start-up and monthly maintenance fee. You can find an accredited credit counseling agency in your area through national associations, such as the National Foundation for Credit Counseling, the Association of Independent Consumer Credit Counseling Agencies or the American Association of Debt Management Organizations.