By Edd Staton and Cynthia Staton
Retirees should avoid credit cards, right? Think again. Give yourself some credit–without the debt, if you play your cards right.
This article is reprinted by permission from NextAvenue.org.
A series of frequently broadcast TV commercials ask, “What’s in your wallet?”
Along with a driver’s license, family photos, old receipts, and heaven knows what else, the average American has three credit cards. Boomers have almost five.
This finding is somewhat paradoxical since it’s well documented that retirees spend less as they advance in years. So what’s up with all that plastic taking up space in our wallets?
Habit and inattention are most likely to blame. Maybe a card was obtained years ago and, especially if there’s no annual fee, is tucked away unused and forgotten about.
See: 8 signs you need a new credit card
No harm no foul, right? Besides, common advice for retirees is to minimize credit card usage anyway. But here’s the thing. If you are one of the 71% of Americans making purchases with either cash or debit cards, you’re unwittingly leaving money on the table.
Want to travel more? Credit-card issuers’ sign-up bonuses of over 100,000 miles or points can help pay for your trip. Looking to cut corners in these inflationary times? Cash-back cards offer bonuses of up to $200 on the first $500 you charge to them and 5% cash back on subsequent purchases. (All offers valid at time of publication.)
Many people suspect they are not getting the best deals on their credit cards. A recent nationwide survey of 1,000 people conducted for Experian (EXPN.LN), the credit reporting agency, found that more than half of Americans are unsatisfied with the credit cards they have. More than 60% believe there are better options out there, but feel the research required to find them is too daunting.
Let’s simplify the process and find the perfect credit card for you.
First things first
Commit to these two habits going forward:
Approval for most cards requires a credit score of 700 or more. Do you know your current score? Federal law allows you to get a free report annually, so visit annualcreditreport.com for yours.
Your new credit card strategy can be as simple or complicated as you choose. If you have no major travel plans, then obtaining the best available cash back card may be all you need. As will soon be explained, supercharging your travel aspirations requires obtaining a series of cards.
Cash back cards
Features to look for in everyday rewards cards are no annual fees and an attractive earning structure. Since you’ve committed to paying off the balance each month, APR (annual percentage rate) isn’t a concern. Here are three highly recommended choices with no annual fee (always read the fine print):
Citi Double Cash. Looking for maximum earnings with minimum effort? This one’s for you. Get 1% cash back on all purchases and another 1% when you pay your bill. Plus, for a limited time, you can earn $200 cash back by charging $1,500 of purchases to the card within six months of opening the account.
Amex Blue Cash Preferred. Do you eat most meals at home and watch a lot of Netflix (NFLX)? This card rewards users with 6% on purchases at U.S. supermarkets and streaming subscriptions, 3% at gas stations, and 1% on everything else. You also get $300 cash back if you charge $3,000 to the card in the first six months of membership. The $95 annual fee is waived the first year.
Chase Freedom Flex. Willing to put in a bit of effort to get even higher rewards? This card lets you earn 5% cash back in a different category you choose each quarter, 3% on dining (including takeout) and drugstore purchases, and 1% on everything else. There’s a lucrative sign-up bonus too: $200 cash back after charging only $500 to the card in the three months after you open the account.
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Travel rewards cards
Whereas choosing the best cash back card for your lifestyle is basically “one and done,” the optimum strategy for travel cards is more involved. The basic idea is this:
Apply for a card and use it exclusively until you’ve fulfilled the spend requirement and earned a big sign-up bonus. Immediately put that card away, apply for another one, and repeat the process over and over.
Credit cards issued by airlines offer rewards in miles. For most U.S. carriers, these never expire even if you cancel the card. Traditional card companies use points that are available only as long as the card is active. Both miles and points can be redeemed for flights, accommodations, and a wide variety of shopping options.
Be sure to read: These are the airlines with the most delays and cancellations
Each mile or point earned is generally worth 1 cent. That may not sound like much, but lofty sign-up bonuses of 50,000 to 100,000 points or more (which translates to $500 to $1,000 or more in credit) can kick your travel plans into high gear in a matter of months.
Since miles don’t expire, it makes sense to obtain a card with any airline you might ever use for flights. At renewal you can decide if the additional benefits are worth paying the annual fee. For cards with points rewards, the best plan is to “earn and burn” — use all the points within the first year, then cancel the card.
Take a look at these two popular travel reward cards with low annual fees:
Chase Sapphire Preferred. Often rated as one of the best for total value, you earn 60,000 bonus points (worth $750 for travel booked through Chase (JPM) Ultimate Rewards) after charging $4,000 to the card in the three months after you receive your card. You also earn three to five times as many points for various other purchases. The annual fee is $95.
Capital One Venture Miles Rewards. Earn 75,000 points after charging $4,000 to the card in the three months after you open the account. Earn five times the usual number of points on travel booked through Capital One (COF) Travel and twice as many points on all other purchases. The annual fee for this card also is $95.
Also read: Six moves to turbocharge your credit card rewards this holiday season
Using the right credit card for everyday purchases and paying off the entire balance each month will put extra money in your pocket. Start small. Pick one new card that supports your lifestyle and apply today. You won’t believe how easy it is to quickly begin racking up impressive cash back and travel rewards.
Edd and Cynthia Staton write about retirement, expat living and health and wellness. They are authors of three bestselling books and creators of Retirement Reimagined!, an online program to help people considering the retirement option of moving abroad. Visit them at eddandcynthia.com.
This article is reprinted by permission from NextAvenue.org, (c) 2022 Twin Cities Public Television, Inc. All rights reserved.
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