Grandparents are drowning in credit card debt

Older nonwealthy Americans are racking up credit card debt at a rate that outpaces other groups.

People age 65 and up carried an average of $10,235 credit card debt in 2008, according to a study released Tuesday by Demos, a public policy research group. That's an increase of 26% since the organization's last survey of low- and middle-income borrowers in 2005. The average debt for all borrowers in the survey rose just 3%, to $9,827, during that same time period.

Rising health care costs may be one reason seniors are turning to plastic, the study shows. More than half of indebted families surveyed cited medical expenses as a major factor that contributed to credit card debt; the average household, in fact, attributed $2,194 of credit card debt to medical expenses. Senior households, however, blamed almost $4,000 of credit card debt on out-of-pocket medical costs. Prescription drugs were the medical expense most often cited.

Another key finding in the survey, aptly titled "Plastic Safety Net," contradicts the notion that credit card debt is strictly a result of frivolous spending. Three out of four households surveyed said they used credit cards to pay for expenses including car and home repairs, job loss, college attendance, loans to relatives and operation of a business. More than a third of households reported relying on credit cards to cover basic living expenses for five of the last 12 months. Households that used credit cards for basic living expenses had a much higher average balance -- $13,302 -- than those who did not ($7,795).

Results were based on a phone survey between April and August 2008 of 1,205 low- and middle-income households whose incomes fell between 50% and 120% of the local median income. Participating households had to have credit card debt for more than three months at the time of the survey.