It’s important to use credit cards wisely and try your best to only charge expenses that you can pay off by the time your bills come due. Unfortunately, many consumers fall into the trap of racking up credit card interest on their charges, which can ultimately lead to costly debt. And that extends to retirees.
If you’re retired, you may be wondering if it’s a good idea to use credit cards regularly, or if you’re better off sticking to cash. And the answer is that it depends.
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The pros and cons of credit cards
When it comes to credit card usage, retirees should aim to follow the same rules as working consumers — aim to pay off those balances every month before interest accrues. If you’re retired and you stick to that rule, then there’s nothing wrong with using a credit card.
In fact, charging expenses on a credit card could work to your benefit in retirement. Say you’re doing more travel now that you no longer have a job to report to all the time. If you rack up enough cash back or air miles, it could make your trips more affordable.
Similarly, many retirees live on a tight budget. If you use your credit cards to pay for essentials like food, groceries, and medication, you’ll put yourself in a position to snag reward points or cash back for the items you were already planning to purchase.
Of course, just as those who work have the potential to misuse their credit cards, retirees do, too. So you’ll need to be careful not to go overboard with your credit card charges.
Sometimes, expenses creep up that need to be dealt with right away, and if you don’t have the money in savings to cover them, you may have to whip out your credit cards instead. But barring unforeseen expenses, your goal should be to only charge those you can pay off by the time your bills come due. And if you set yourself up on a budget, you’ll have an easier time knowing how much you can afford to charge each month.
The danger of credit card debt for retirees
Having too much credit card debt can damage your credit score, making it harder to borrow money when you need to. Now some retirees might assume that their credit scores don’t matter as much as they did when they were younger. But actually, you should aim to keep your score in good shape no matter your age or stage of life. You never know when you might need to borrow in a pinch, and wrecking your score could take that option off the table.
Furthermore, if you rack up credit card debt during retirement, you might struggle to pay it off in your lifetime. Then, your outstanding debts would need to be paid out of your estate before your assets are distributed to your heirs, leaving them with less. Sometimes, that situation is unavoidable. But the more savvy you are about credit card usage in retirement, the less likely you’ll be in that position.
The bottom line
Credit cards can be a useful financial tool, whether you’re working or retired. As long as you use your credit cards responsibly, there’s no reason not to reap the benefits they offer in retirement.