12 June 2014
Seniors Alert: Why You Need Your Credit Cards

The U.S. Census Bureau reports that nearly 14% of the population is 65 years of age and older, and that number will grow as the Baby Boomer bulge moves into retirement.*

Part of enjoying a comfortable retirement for many seniors is paying off debts and liquefying tangible assets – like selling the family home to move into a rental in an area where it’s warm year ‘round.

You may be tempted to retire your credit cards when you retire, but credit experts recommend that seniors keep at least one or two credit cards — for lots of good reasons.

Don’t Become “Unscorable”

If you have more than enough assets stashed in secure accounts, you might be tempted to cut up your credit cards, pay off the mortgage and live off your Social Security and investment savings – but that may actually have a negative impact on your credit score.

Eliminating the monthly mortgage by selling the family home may liquidate assets, but there may be no record on your credit report of homeownership, which is often a solid measure of credit-worthiness.

If you close out long-held credit card accounts, you may lose that stellar credit history you’ve worked so hard to build up. You won’t have enough recent credit history.  You may become unscorable.

What’s The Problem with Having No Credit Record?

To strangers with whom you engage in business, you’re usually as reliable as your credit report says you are. No credit report, or a skimpy credit report, may limit your financial options in the future. Examples?

If you sell the house, take a world cruise for two years, then try to rent another property, chances are your new landlord is going to pull a credit report on you. If it comes back blank, he may not see enough information to determine if you’re a good credit risk.

Without a credit history, you may be required to make a deposit with local utility companies to get service – money that could be used elsewhere.

What would you do if a loved one needed a co-signer on a loan to get a car or buy a home? Without a solid credit history, you’re basically “invisible” to potential lenders who want to see a long payment history.

If you cut up those credit cards and live off savings, you may actually have trouble obtaining a credit card in the future – even if you have cash stashed for security. Credit card issuers may not grant the credit limit you ask for because there’s no credit history.

The Right Credit Card for You

First, shop around for the best credit card to fit your lifestyle. Look for a card that offers rewards that are attractive to you.  If you carry a credit card balance, look for card that offers a low interest rate.

Consider getting a secured credit card to prevent over-spending. Secured card spending is limited to what you pay in advance to back up purchases. If you do get a secure credit card, be sure to ask if the issuer reports all card activity to the three major credit reporting companies: Experian®, TransUnion® and Equifax®.

Make small purchases regularly using your credit card.  Showing monthly activity and a solid payment history should help maintain a good credit rating.  Consider having a utility bill charged to your credit card. Most utilities offer automated payment options using a credit card. Charge your cable costs, newspaper subscriptions, telephone and other regular expenses to your credit card to help show that you’re a reliable credit risk.

Forget the hype. You may receive a lot of tempting credit card come-ons in the mail. These may or may not be good options for you. It’s better to talk to a local bank representative to get the right credit card and the right rate for your retirement.

Then, just kick back and relax. You’ve got credit.

Click here for information about credit card options with Nevada State Bank, or stop by any branch.

 

The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice.

 

*http://quickfacts.census.gov/qfd/states/00000.html

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