If you remember the Diner’s Club card, you’re probably a Baby Boomer. Originating in 1950 and claiming to be the first American credit card, it has long faded from its glory days as a “jet-setter’s” favorite financial accessory. Maybe it was your first credit card, too.
How times have changed. According to research by the University of Michigan Law School, two-thirds of senior Americans say that high credit card debt is the primary reason they have filed for bankruptcy. And AARP’s Public Policy Institute has reported that U.S. middle-class adults, aged 50 and older, carried an average credit card balance of $8,278 in 2012.
Perhaps you are struggling with credit card debt, or are looking for ideas on how to effectively manage your credit cards as you approach, or enjoy, retirement – or are simply seeking a card that does a better job of catering to your needs. If so, read on.
How to Manage Credit Card Debt as a Senior
Whether you are still working full or part-time, or drawing on your retirement assets, it’s a fact: you’re facing a financial transition. Carrying large credit card balances is more difficult now than it was in your prime earning years. Here are some suggestions on how to manage credit cards at this new stage in your life:
- Make lifestyle adjustments – AARP says that a third of senior households use credit cards to pay for basic living expenses such as rent, mortgage payments, groceries, or utilities. That can put your solvency at risk. As your income levels off and eventually begins to decline, it’s important to make adjustments to your everyday expenditures. Charging expenses to maintain a rarely used club membership or for premium cable services that you never watch can eat away at your precious financial resources.
- You can’t help your kids forever – Nearly one-quarter (23%) of older Americans are taking on credit card debt to help family members. While they will always be “your babies,” at some point your adult children have to stand on their own. Resist the urge to jump to their aid upon every setback. And in fact, don’t immediately refuse their offers to help you.
- Budget for medical expenses – An astounding half of U.S. adults, aged 50 and older, carry medical expenses on their credit cards, according to the AARP research. Not surprisingly, prescription drugs and dental expenses were the main contributors. Once you bring your everyday expenses in line, set aside a pool of funds to help pay for planned – and unplanned – medical expenses.
- Consider a balance transfer – This can be an effective, though sometimes temporary, fix to help trim or eliminate high credit card balances. Taking the balance of a credit card with a high interest rate and transferring it to a low interest credit card can save you sizeable interest charges. And if you can find an introductory 0% APR offer, even better! Reducing the rate will help your regular payments reduce the principal balance faster. The downside: there may be a transfer fee involved and not everyone who applies for such a card will qualify. And remember, some terms may be temporary. Be sure to carefully review all of the details of any balance transfer offer.
- Never tap your retirement assets to pay credit card debt – Your 401(k), IRA or any other tax-deferred retirement assets should remain off limits for the payment of credit card debt. When you consider the potential tax implications, as well as the draining of your finite, long-term assets, there is just no way to justify it.
- Seek community or government assistance – If you are facing a financial squeeze, look for help from local churches, charities and government programs. If you have a limited income, you may qualify for the Home Energy Assistance Program which can help pay utility bills as well as energy-related home repairs. The SNAP Program can assist in the purchase of groceries and the Lifeline program can help cover the cost of basic local telephone service. AARP has a helpful page of links to point you in the right direction for numerous senior assistance programs, plus it has a guide to public benefits that are available in your state.
What Seniors Need to Understand about Credit Cards
Perhaps you’ve got a firm handle on your credit card debt and are looking for credit cards that cater to your specific needs and lifestyle. Here are a few features you might want to consider:
- Customer service standards – If you don’t want to access your credit card information strictly online, look for a credit card issuer that provides excellent telephone support and easy to read statements. Call customer service prior to signing up for the card to ask about the features and benefits of the card you are considering in order to get a feel for their service standard.
- Watch for credit card scams – Avoid high-pressure telephone sales scams with offers that are “good for today only” or that promise an “instant rebate.” Some fraudsters will even ask for an application fee up-front. Always ask for and wait to receive written information regarding any credit card offer before making a decision. If you are dealing with an unfamiliar company, check them out with the National Fraud Information Center.
- Keep at least one credit card – You may wish to swear off debt once and for all, but it’s important to keep at least one credit card. Not only will it come in handy in emergencies or for unexpected expenses, it will help maintain your credit score. Pay off and lock-up unused credit cards, but don’t close the accounts. Your long history of prompt payments on those cards, plus the available but unused credit will help maintain, or boost, your credit rating. Remember to use your credit card every now and then, paying off the balance each month, which also helps to keep your credit in good standing.
A Sampling of Stand-out Credit Cards for Seniors
While offers and terms can vary with time, these cards have some of the features that many seniors look for. Research these and others to find the card that best meets your needs.
- Capital One Platinum Prestige Credit Card – A good candidate if you are considering a balance transfer from a high interest rate credit card. It offers an introductory 0% APR on balance transfers as well as purchases for at least one year, no annual fee and 24-hour roadside assistance.
- Discover it – You might find this card a good choice if you prefer personal service. Whenever you need assistance you can talk to a real person, with 100% U.S. based customer service – no hard-to-understand foreign customer service here. It also offers a 0% promotional rate, as well as no annual fee.
- BankAmericard Cash Rewards – If you like rebates, you might like this card. It offers 1% cash back on all purchases, 2% at grocery stores and 3% on gas, subject to a $1500 purchase limit each quarter. An intro rate of 0% also applies, along with no annual fee.
- United Mileage Plus Explorer Card – If you are enjoying a travel-intensive retirement you might like the benefits of this card from United Airlines. It has no foreign transaction fees, and you earn 30,000 bonus miles after you spend $1,000 in the first 3 months. It also allows you to check your first bag for free and enjoy priority boarding privileges along with access to United airport hospitality clubs.
Retirement living can have its challenges, but it can also be the best time of your life. With proper management of debt and the right credit card in your pocketbook, you can make your senior years, your best years – free of financial distress and scams.