Elderly consumers are piling up credit card debt at a rate far exceeding all other age groups, with health care costs and deteriorating values of retirement savings causing many age 65 and older to increasingly rely on plastic for routine living expenses.

That's one of the main findings of a new report on consumer credit card debt issued by the progressive public policy research and advocacy agency Demos, released on Tuesday. Titled "The Plastic Safety Net," the study also reported that medical expenses were a contributing factor for more than half of all families with ongoing credit card debt, and that nearly one-quarter were using credit cards to meet expenses during a layoff or job loss.

"American families are facing financial hardship not experienced for generations, and we've commissioned these surveys to tell us precisely why households are turning to credit cards so often" said Tamara Draut, Demos vice president of policy and programs and co-author of the report. "The results are clear: wages have stagnated while medical and housing costs have skyrocketed, and if confronted with a layoff or health emergency there are few, if any, personal or public safety nets adequate enough to help in a crisis. Households are turning to high-cost credit cards to keep afloat."

Survey conducted prior to collapse

Notably, the survey was conducted from April to August 2008, prior to last fall's collapse of the credit markets and subsequent rise in unemployment. The survey focused on low- to moderate income households that had carried credit debt for at least three months.

Ongoing credit card debt for consumers age 65 and above increased 26 percent over the period from 2005-08, with an averaged indebtedness of $10,235 for that group. Of that total, $3,988 was attributed to medical expenses. Averaged indebtedness for all U.S. households with ongoing credit card debt was $9,827, up only 3 percent from 2005.

Nearly half of the survey respondents admitted that small, nonessential purchases were a contributing factor to their credit card debt. Yet significant numbers also reported using plastic for basic living expenses, including car repairs (41 percent), home repairs (32 percent) or the purchase of a major appliance (25 percent).

Fifteen percent reporting using their credit cards for small business expenses, while about 10 percent said they'd used credit cards to help cover tuition or other college expenses for themselves, their partner or a child.

Many use plastic to cover basic expenses

More than one household in three reported using credit cards to cover basic living expenses - including rent, mortgage payments, groceries, utilities or insurance - during the past year, doing so on an average of five months out of 12.

Twenty-four percent said they had used plastic to help meet expenses due to a layoff or job loss, a figured that has likely increased with skyrocking unemployment since the survey was concluded. Only about one household in six reported carrying high levels of credit card debt over an extended period of time; just over half said they experienced swings in their indebtedness, paying down their debt over time before one or more events caused them to run up their debt again.

Nearly one household in four reported paying an interest rate of 20 percent or more on their credit card with the highest balance. Blacks and Latinos were significantly more likely than whites to be paying higher rates, with about one-third paying in excess of 20 percent compared to less than one-quarter of whites.

Home equity tapped to pay credit cards

Many indebted homeowners tapped into their home equity to help bring down their credit card debt, drawing on an average of over $14,000 in home equity over the previous five years.

The study focused on low- to moderate income households, with incomes ranging from 50 to 120 percent of the median income level, or about half of all U.S. households. Of these, the survey targeted those with ongoing credit card indebtedness, defined as carrying a balance for the past three months or longer, which made up about 45 percent of the households in that income range.

Published on July 29, 2009