Credit cards can be good and they can be bad, depending on how you go about using them. If you have the right cards after retirement, it is very possible that you can make them work for you in saving you money and even reducing the amount of credit card debt you have.
Retirement is very exciting. The day that you retire and your coworkers give you the cake, the gold watch, and the wonderful sendoff is a day you'll never forget. Unfortunately, many retirees leave the workforce with something else and that is debt. According to a recent poll conducted by Harris/Decima, 59 percent of retired Canadians are in debt when they leave work. Their credit cards account for 39 percent of the total. In an Equifax Canada report, the debt level that seniors are experiencing is increasing more than any other age group each year. It seems that seniors are attracted to credit cards and this attraction is gaining momentum.
In some cases, seniors go into debt when their children go into debt and they bail their children out. The other reason why seniors tend to go into debt is because they have difficulty coming to terms with their new reality and that is that the money they have to live off of has already been established. They don't have additional earning power, but they are also not willing to change their lifestyle in order to adapt to their new income stream.
But the question is whether or not cutting up the credit cards is the question. It actually may not be. Although it is important to reduce debt as much as possible when going into retirement, credit cards can make a lot of sense when they are used wisely. Not only do some of them offer purchase and fraud protection, as well as cash back and other benefits, but credit cards can bring a degree of convenience. Seniors who have difficulty leaving their homes can use their credit cards to shop online and have some of their essentials, such as prescriptions and groceries, delivered to their homes. Automatic bill payments are also quite useful because they make it impossible to forget to pay the bills.
The truth is that it is almost impossible to function in today's world without at least one or two credit cards. However, this doesn't mean that you should stay with the credit cards that you have always had after hitting retirement. That platinum credit card that you have had since you were 45 that has the high annual fee and a points program that is hard to grasp may not be the right card for you anymore. Instead, step outside your comfort zone and check out what the other financial institutions have to offer.
Unfortunately, many people simply get caught in a financial rut and they don't check out the other options available to them because they think that what they currently have is working for them. In order to be truly rewarded, seniors need to research the different options that are available to them, whether those options are lines of credit or credit cards. The goal is to find the most efficient form of financing at this stage in their lives.
So what credit cards are best for those who are no longer in the workforce? The answer is not a simple one. How you determine what you need is by looking at your lifestyle and deciding what is the most important to you. At the same time, you will want a card that charges you the lowest interest possible. There are, however, some considerations, such as those that follow.
If you find yourself in debt all of a sudden and you are paying a high amount in interest charges on your current credit cards, it can make sense to transfer the balance to a card that offers lower interest rates so you can reduce the debt quicker. There are some cards that have introductory rates on balance transfers, which can allow you to pay the debt off for even less. If you want a better rate all of the time, there are card that offer low rates throughout the life of the account. Some of these cards don't even have an annual fee.
Cash back rewards can come in very useful. They can be helpful toward saving money. For instance, you may get cash back for every purchase that you make or for specific purchases. There are some cards that give you extra rewards for the most common purchases you make. Many times, these cards are the ones that will save you the most. For instance, you may get cash back on gas and grocery transactions, which are two of the most common purchases that you make.
If you travel or you want to travel, a travel reward card can save you a lot of money on a trip. This can enable you to live the life that you want to live without spending a fortune to live it. The simpler the travel card, the better. For instance, you could earn miles for every dollar spent on the card. It is also best to find a card with miles that don't expire and doesn't impose limits on the number of miles that can be earned. That way you can rack up the points for as long as you need to and then use them to go on the trip you have always wanted to go on. This is one way to make travel after retirement much more affordable so you can still do some of the things you want to do after you retire.
Retirement is a happy time, but it is also a time to become realistic about finances. Since the income stream is changing, it is important to be mindful of it and take measures that can reduce debt while still having a high quality of life.