Sep 3, 2024
The average baby boomer's credit card balance today is $6,648, according to Experian. But some older Americans may be sitting on much larger balances.
Credit card debt is a tough thing to tackle at any age and on any income. But for retirees, it can be exceptionally dangerous. That’s because many retirees live on a fixed income that consists mostly or only of Social Security. And in that situation, it’s hard to keep up with credit card debt payments, let alone eliminate a balance for good.
Advertisement
If you have a retired parent with a huge pile of credit card debt — say, a whopping $100,000 worth — you may be eager to help them dig out of that hole. But what if they still have a mortgage and no savings? Is there any hope? The good news is that there are some options you can explore.
Thanks for subscribing!
Read the best of Moneywise in 5 minutes or less.
By signing up, you accept Moneywise Terms of Use, Subscription Agreement, and Privacy Policy.
Tapping home equity could help
It’s not an unusual thing to be retired with a mortgage these days. As of 2022, 41% of U.S. homeowners aged 65 to 79 had a mortgage on their primary home, including home equity loans and home equity lines of credit (HELOCs), according to data from the Joint Center for Housing Studies of Harvard University.
The good news, though, is that homeowners aged 65 and over have a median home equity of $250,000, according to the National Council on Aging. So if you’re trying to help a parent dig out of credit card debt, using a home equity loan or HELOC could be a wise move. That’s because the rate on one of these products may be substantially lower than the interest rate their credit cards are charging.
Of the two, a home equity loan is more ideal for one big reason. These loans offer the benefit of a fixed interest rate. HELOC interest, like credit card interest, is generally variable, making ongoing payments less predictable.
Must Read
- The ultra-rich use these 5 real estate strategies to build wealth while they sleep — you can start with just $100
- Here’s the average income of Americans by age in 2026. Are you keeping up or falling behind?
- Insurance companies profit most from drivers who auto-renew without shopping around. Comparing 100+ quotes takes 2 minutes and costs nothing
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Downsizing is an option
If you have a retired parent with a pile of credit card debt and a mortgage, downsizing could be the ticket to paying off both. As of 2022, the median mortgage balance among Americans aged 65 to 79 was $110,000, according to the Joint Center for Housing Studies at Harvard. If your parent has $250,000 worth of equity, they may be in a position to pay off their mortgage and credit card balance by moving to a smaller property.
That said, be careful with this approach if the sale proceeds in question won’t allow your parent to buy their replacement home outright. Mortgage rates are fairly high today, with an average of 6.35% for a 30-year loan, per Freddie Mac.
Now, keep in mind that mortgage rates are still generally much lower than credit card interest rates. If downsizing allows your parent to pay off their credit cards but retain a mortgage, that may not be a terrible solution.
You can also, if it’s feasible, have your parent sell their home and move in with you for a few years to get to a better place financially. Of course, the downside here is the loss of privacy for both you and the parent you may be looking to house. But the benefit is allowing your parent to save a few years of Social Security checks so they’re more stable. And if you need help with child care, having a retired parent around could save you money.
You May Also Like
- JP Morgan sees gold hitting $6,000/oz before 2027 — and a Gold IRA lets you hold the physical metal while deferring the tax bill. Get your free guide from Priority Gold
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how
- Millionaires under 43 are reshaping investing — just 25% of their portfolios are in stocks. Here’s where their money is going
Maurie Backman has been writing professionally for well over a decade. Since becoming a full-time writer, she's produced thousands of articles on topics ranging from Social Security to investing to real estate.
