Thursday, December 12, 2013

What Retirees Need to Know About Credit Cards

Retirees are generally in a different financial position to those yet to wrap up their working days and spend the rest of their years doing the things they never got around to in the past. As a result, they need to use their finances differently and also avoid incurring debt wherever possible, even short term debt if feasible.

However, certain forms of credit like credit cards are still handy to use in retirement though retirees are encouraged to use their credit cards effectively and without incurring unnecessary debt, and to also focus their attention on the most competitive credit cards on the market, like those offering interest free purchases and terms.

Three mistakes retirees often make with their credit cards:

Failing to choose the right credit card

The biggest mistake retirees often make with their credit cards is applying for and using the wrong card. There are often major differences between credit cards and retirees can avoid financial difficulties by selecting a card that’s suitable for their needs, like GemVisa low interest credit cards. 

What’s more, there’s generally a lot of fine print involved when applying, so it’s often a good idea to bring someone along, like an adult child, to help select a suitable card. 

Using credit cards to supplement income

Many retirees have the tendency to use their credit card for everyday purchases, which is fine, as long they possess the right card and they pay the balance in full each month. However, many use their credit cards to supplement their income and run into problems when they can’t make the repayments in full because the interest accumulates and becomes more difficult to pay off. 

Failing to make a debt plan

If you’re going to incur debt you need to make a plan to pay it off and without incurring more interest than you can afford to pay. Whilst pensions and similar forms of retirement income cannot be accessed by creditors, their retirement savings and nest egg can, so by failing to create a debt plan they’re putting their savings, and therefore their financial livelihood, at risk.

Three credit card strategies retirees should take note of 

Don’t stop using your debit card

This is the first rule of effectively using your credit card as a retiree – only use it when it’s necessary. Credit cards and debit cards are just as convenient as each other, and whether you have your weekly, fortnightly or monthly spending allowance in your debit card account or another from which you transfer money over, you’ll generally find that you can use a debit card instead of a credit card for everyday purchases.

Pay your outstanding credit card balance in full every month

The longer you leave your debts the more interest accrues and the more you’ll need to find a means of repaying. Credit cards are a luxury during retirement, after all, most retirees don’t have a regular income coming in unless they have investments and even then they still shouldn’t incur new debts. 

Avoid using your savings to pay off your credit card balance

You should avoid dipping into your savings or nest egg at all costs, and especially not to pay off your credit card balance at the end of the month. You should have created a budget to live off comfortably and if you’re going to use a credit card make sure that you’re able to pay the balance off using your retirement income – investments, pension, superannuation, etc – not your nest egg.

Enjoy a comfortable, hassle-free retirement by selecting and using your credit cards wisely.

About the Author:
A company that brings to the world the GemVisa low interest credit cards, GE Finance and Insurance is a leading alternative to banks. They are a part of GE Capital and cater to clients from all over New Zealand.

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