Retiree credit-card debt has increased by 89% over the last decade. Is it spiraling out of control?

When 83-year-old Dollie Hawkins contacted Consolidated Credit Counseling Services (CCCS) in Fort Lauderdale, Fla., last summer, she owed more than $11,000 on her two credit cards. The minimum payments alone were eating up almost a third of her $899 monthly Social Security check -- her only source of income. "It really had me right against the wall," she says. She saw credit-card consolidation as her only option.

CCCS renegotiated Hawkins's interest rate from 26% to 5%, which lowered her monthly payments, and put her on a schedule to be debt-free in about four years. But even with the lower payments, Hawkins is struggling. This month, she's skipping the homeowner's insurance bill on her small two-bedroom house in Miami. "I can't do it all at once," she says.

Credit-card debt used to be considered rare among the elderly, many of whom have spent most of their lives not owning a credit card, let alone carrying a balance that's beyond their means. But it is rare no longer. "Credit-card debt is becoming common among older Americans in the same way it's common among all other age groups," says Tamara Draut, a director at Demos, a New York-based research and advocacy company, and co-author of a recent study on credit-card-debt trends among retirees.

According to the study, nearly one-third of senior citizens in the U.S. carry card balances. Within that group, the average debt is $4,041 -- an 89% increase over the past decade. (For all age groups, the average increased by 53% over this same time period, according to Demos.) The debt increase is particularly sharp during the first years of retirement, the study found: People aged 65 to 69 saw their credit-card balances grow by 217%, to $5,844, during the decade. And since the data used in the study come directly from consumers, rather than creditors, the real numbers could be much higher, warns Draut. She may be right. The rate at which retirees are filing for bankruptcy has more than doubled over the past 10 years. Retirees are now the fastest-growing segment of bankrupted Americans, according to research by the Consumer Bankruptcy Project at Harvard University.

What's driving this trend? Longer life expectancies, soaring medical costs, a bear market that blindsided many seniors -- and a credit-card industry that's willing to lend to just about anyone. These days, even seniors with little income or poor credit histories can get a credit card -- albeit at interest rates that are far higher than the 13% national average. As a result, seniors who are having trouble making ends meet are increasingly using credit cards to pay for basic necessities, says Steve Rhode, founder and former president of credit-counseling agency MyVesta, who now runs his own money coaching practice. The average amount of debt his older clients carry is about $75,000. "The clients I've had who are seniors are just barely getting by," he says.

In fact, the Demos study found that one-fifth of all credit-card-indebted seniors spend more than 40% of their income on debt payments alone. (The average senior's household income was $23,118 a year in 2001, according to the latest U.S. Census Bureau statistics.) The trouble for Hawkins, the 83-year-old retiree, began 15 years ago when she lost her job and had to live off credit cards until Social Security kicked in. And once it did, those meager payments barely began to dig her out of the deep hole she was in.

Most younger Americans have grown up with credit cards and are comfortable carrying debt. But for seniors, credit-card debt can take a great emotional toll. "The people we've talked to are really scared that they're in debt," says Draut. Worse yet, in their desire to eliminate debt, they can easily be duped by various debt-consolidation scams or predatory lending practices. The AARP has warned, for example, that retirees are three times as likely as other Americans to fall victim to various home-equity scams, whose high interest rates and unaffordable repayment terms often lead to foreclosure.

At the same time, most legitimate debt-management strategies available to younger people don't make sense for retirees. The usual route for many homeowners -- a home-equity loan or refinancing -- isn't a good idea for someone who has already paid off a mortgage and can't comfortably handle a new bill. And finding a job is often impossible. "You fill out applications, and they say they will call you, but age makes a difference," Hawkins says.

Hawkins's strategy is to slowly pay down her debt, month by month, until it's gone. "I just say, God help me pay it off, it's going to be a long time," she says.