What Seniors Should Look for in a New Credit Card (and What to Do With Your Old Ones)

What Seniors Should Look for in a New Credit Card

As we age, our financial priorities and spending habits tend to change.

According to the U.S. Department of Labor, seniors often have less household income so they tend to spend less than people in their 40s or 50s, who are in their prime earning years. Getting in over their heads is especially troubling for the older population because they can’t typically generate income from other sources to pay off their outstanding balances. With all these considerations, choosing a credit card that doesn’t pave the way to significant debt is a smart way to go as we grow older.

You’d better shop around. Seniors looking for new credit card offers should do their due diligence and weigh fees, interest rates, and rewards before they apply. Given that many older Americans are on restrictive budgets, fee- and rate-friendly cards make sense. Ask yourself what your ability will be to pay off any debt that you incur from the card. Ideally, you should only add a credit card to your payment arsenal if you’ll be able to pay off the balance. However, if you do have debt, carrying it at the lowest cost possible to avoid eating into your hard-earned nest egg is wise. As you shop for your new credit card, be sure to read the fine print so you understand the terms and conditions.

Look for a card that reflects your lifestyle. With people living longer and being more active, travel is an increasingly appealing option for retirees. If you’re wanderlust, you might want to look for a card that accrues points to pay for your next excursion, such as the traditional airline rewards card. Cash back and general rewards cards are also popular options for seniors. Market research conducted by Chase, which offers a co-branded AARP card, revealed that retirees especially appreciate discounts and everyday value. If you’re carrying a balance, be on the lookout for cards that offer a 0% APR for transferred balances and low or no transfer fees.  Although you may think all credit cards are created equal, that isn’t the case, and some may be far better for your specific needs than others. 

Should you even bother with credit cards? You may not see the point of using plastic if you’ve got great credit and typically pay via cash or debit. But responsible use of a credit card can help you build a strong credit history and it also offers security. In fact, according to the FTC, credit cards offer more protection against fraud than debit cards: if your credit card is ever used to make unauthorized purchases, the maximum you’re required to cover is $50. On the other hand, you could potentially end up fronting any unauthorized purchases on your debit card. And if your debit card is ever stolen, you run the risk of having your bank account wiped out.

What about those old credit cards that are weighing down your wallet? Once you’ve upgraded to a better card, you might be tempted to close your old credit card accounts. But if you opt to keep them open, those old cards can help you build credit. Of course, you won’t want to pay for the privilege of doing so, so stop making new purchases on your old card and pay down the balance to $0 as quickly as possible. Once you decide to stop using your old card, be sure to keep it in a secure place. You don’t need to carry it around in your wallet, but it should be accessible in case of emergency. If shopping websites or other companies have your old card number on file, consider updating your information. Even after you take these precautions, your card could still be vulnerable, so read your monthly statements to make sure your account hasn’t been compromised and check your credit report annually. If the credit card company won’t cancel your annual fee, the benefits of keeping your old card open may not be worth the expense. And if you’re not concerned about building credit, you may want to cancel your old card to simplify your financial life.

Need some guidance navigating the credit card maze? Our friendly, knowledgeable advisors can help, so please feel free to contact us.

About FAI Wealth Management, Inc.:  Located in Columbia, Maryland, FAI focuses on helping clients create the financial future they desire by protecting their wealth, making the most of their assets, and planning for life's uncertainties. The firm combines fee-only, fiduciary-driven guidance with highly personalized, consultative financial planning and investment services that enable individuals, families, and businesses to navigate complex life transitions. Founded in 1987, FAI currently manages more than $350 million in client assets nationwide. For more information about FAI Wealth Management, please visit the website at https://www.faiwealth.com or call 410.715.9200.

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