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Retired? How to pick the best credit cards for you

by Peter Andrew

For most advertisers, retired folk are all the same: They're fit, have deep tans, dazzlingly white teeth and perfect hair, and spend their lives on cruise ships, golf courses or the terraces of ocean-front fine-dining restaurants. If you're retired, you may well fit that stereotype, but the chances are you don't. Seniors are individuals, just like everyone else, and each has different wants, needs and challenges. So there's no such thing as "the best" credit card for retirees. Just as at every other stage in your life, you have to pick the plastic that suits your particular circumstances best.

Credit cards are for life

Or maybe you think you no longer need credit cards at all. Some seniors reckon that, if they no longer have home, auto or other loans, they can rely on debit cards, checks and cash to pay their way. They believe their credit scores are now an irrelevance. But think again. Scores can affect the costs of a whole host of things -- including some insurance premiums and cellphone plans -- and, absent other credit accounts, credit cards may be your only way of keeping yours high.

And they often provide other benefits that no alternative payment medium can match, including:

  1. Uniquely good statutory protections against fraud.
  2. Extended warranties, and price and purchase protection.
  3. Valuable cash back, and free or cheap merchandise, flights, hotel stays and so on.
  4. Perks, such as priority airplane boarding, free use of airport lounges, hotel room upgrades, concierge services, and privileged access to sporting and entertainment events.

Of course, not all cards deliver all four of those, but, if you choose your plastic carefully, it's easy to find ones that provide the features you value.

Money-rich retirement

If you've built up a substantial retirement pot, you're likely looking forward to continuing to enjoy the good things in life. And maybe you plan to travel enough to justify the annual fee you probably pay for the American Express card you may well have in your wallet. But it's worth exploring some options.

For example, CardName charges no annual fee or foreign transaction fees, but provides 1 percent cash back on all purchases, boosted to 5 percent cash back in shopping categories that change each quarter. Discover is challenging AmEx for industry leadership in customer service, according to J.D. Power and Associates data, and this product offers emergency travel assistance and auto rental insurance.

Of course, if you're a frequent traveler and are loyal to a particular carrier or hospitality provider, it's worth checking out branded airline and hotel credit cards.

Time-rich retirement

The trouble with working is that it takes up so many hours. Okay, tyrannical bosses, boring tasks, tedious meetings and demanding customers can be all be problems, too. But, now you're free of all those, you may find more time to take better care of your personal finances.

If so, make the effort to find the very best deals when applying for new cards. In particular, there are plenty of attractive sign-up bonuses being offered by card issuers keen to attract new customers.

It's rarely worth applying for new cards just for these bonuses. Few of them are generous, and FICO, the credit scoring giant, warns that it's best practice to open new credit accounts only when you need them. It's true that the bad impact of each new application fades quickly, but a significant chunk of your score is based on the average age of your open accounts: the older that is, the better.

Of course, this doesn't mean you should never apply for a new credit card. For instance, it may benefit you to occasionally take advantage of the interest-free introductory periods some cards offer on new purchases. Suppose you want to buy a big-ticket item, such as a home theater system, washer or high-end computer. Instead of dipping into your savings, you can leave them where they are, and sign up for a product offering a zero-percent introductory APR on purchases. You then spread payments over that introductory period either using your income or taking the money out of your savings only as you need to. Just be certain you clear the balance before the offer period ends.

'Retiring' existing credit card debt

Almost always, significant credit card debt is better avoided in retirement. If you currently have balances you'd prefer to pay down, then explore balance transfer credit cards. There are offers with zero-percent introductory balance-transfer APR for as long as 18 months, although most charge a balance-transfer fee that usually range from 3 percent to 5 percent of the amount of each balance transferred.

Another option for some might be similar to the deal offered by the PenFed Promise Visa® Card. This levies no balance-transfer fee, but charges an ultra-low 4.99 percent APR promotional balance-transfer rate for a whopping 48 months on transfers made through Sept. 30, 2014. After that, any remaining balance reverts to the credit union's then-applicable standard adjustable rate, which varies with the market based on the prime rates and is currently an impressive 9.99 percent APR. Use the IndexCreditCard.com credit card calculators to model different scenarios and establish the option that suits you better. But be aware that the PenFed offer is likely open only to those with exceptionally good credit.

Used carefully, credit cards might just help you achieve that dream retirement lifestyle so beloved by advertisers -- at least occasionally.

Published 07/21/14 (Modified 06/01/16)

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