Typically, credit card debt is associated with younger spenders, who have lower incomes and are new to budgeting. However, with more individuals raised in a budget-conscious environment since the recession and older credit card holders reducing their incomes, a recent study found some surprising results about the nation’s default rate.
Demos, a public policy organization, found that the credit card default rates of customers age 50 and older have been increasing in the past few years, and about half have been called by debt collectors. As Gail Cunningham, National Foundation for Credit Counseling vice president, explained, “Older Americans living on a reduced income and feeling strapped for money will likely turn to credit cards as a way to make ends meet.”
In addition to reduced incomes, with many retiring or unable to find work, the older population also often encounters higher medical expenses than consumers in their younger years. The study also found that most use their cards to pay for car payments or utilities, typical living expenses and not careless purchases. And many are also looking for help from counseling services, suggesting this trend may change – the NFCC saw an increase in the 55-plus demographic using their services in the past two years.
With more seniors leaving the workforce and met with unexpected emergencies or other costs, these survey results could have been anticipated. But it also points to the importance of using data and decisioning software when providing credit cards or other loans to customers, since qualified borrowers are not always obvious. Especially with credit card applications on the rise, by using data and risk assessment tools, lenders can remain profitable.