As we age, our financial needs change. This includes credit card use as we enter our 50's and 60's. Read on for some tips regarding managing credit at this stage in life.
Proper Credit Card Use for Baby Boomers
By: Gary Foreman
As people enter their 50s and 60s, how they manage their credit changes. Gone are the days when applying for their first store or bank credit card was exciting. Now maintaining the credit score they've earned and keeping things simple are more in order.
So how should boomers change the way they use available credit? Should they carry the same number and variety of credit cards? Or is it time to cancel some credit?
To help us answer these and other questions related to baby boomers and how they use credit, we turned to Michael Osakwe of NextAdvisor.com. Michael is a graduate of the University of California, Berkeley with a BA in Political Economy.
Q: As we enter retirement, our lifestyle and needs change. How would that affect how many credit cards we should have?
Mr. Osakwe: While an individual's financial needs might evolve over time, many might find that their relationship with credit cards likely won't change throughout their life. Even though their spending habits and use of credit cards may change as they age, all cardholders can gain from the benefits credit cards have to offer. For example, credit cards provide cardholders with payment protections they will not receive with other forms of payments. While this feature benefits all consumers, it might prove to be especially useful to seniors, who are often targeted by scammers. Additionally, credit cards are a useful tool for building and maintaining credit, and in many cases, seniors still need to maintain strong credit in retirement in order to access services like certain elderly care facilities. In addition, good credit allows for seniors to easily qualify for refinancing or borrowing if they decide to downsize, move, or need funds for other circumstances. Specific decisions regarding how to manage credit cards will, of course, come down to an individual's preferences and circumstances, but there is definitely a place for responsible credit card use in retirement.
Q: Many boomers have earned a good credit score. Can they afford to apply for new cards without affecting that score?
Mr. Osakwe: Provided that seniors responsibly apply for credit (meaning they solely apply for cards that they qualify for and don't apply for multiple cards at the same time), seniors won't have to worry about their scores taking a hit. While it's true that hard credit inquiries negatively impact credit scores, their effect is usually small if you're not applying for a massive amount of credit at a given time. Seniors, like everyone else, can reap the benefits of credit cards by being selective about what offers they apply for and making sure they qualify for any offer before they apply.
Q: Many of us have accumulated credit cards through the years that we no longer use. How can we know which ones we can cancel without hurting our credit?
Mr. Osakwe: Canceling credit cards is generally a bad idea because it immediately impacts your credit utilization ratio, or the amount of credit you're currently using relative to the total amount of your credit limits, which impacts up to 30% of your FICO credit scores. But, if you do decide to close a credit card, you're better off closing newer cards as opposed to old ones. That's because your oldest credit cards have the longest credit history, and thus, closing them makes you look less experienced with credit, at least as far as lenders are concerned. Additionally, the length of your credit history makes up 15% of your FICO scores, so closing older cards can have immediate negative effects on your credit. While this is something you can recover from if you continue to use credit responsibly, for some, this might not be worth the hassle.
Q: Is maintaining a good credit score important for people in their 60s? Many of them have no need to borrow money.
Mr. Osakwe: Maintaining good credit is essential for people in their 60s because in general, seniors with better credit have more living options should they choose to enter a senior care facility and will likely benefit from good credit in the form of cheaper living costs. For example, ...... To read the rest of the article, please head to Stretcher.com HERE.
My thanks to Gary with The Dollar Stretcher for sharing this excerpt. See Stretcher.com. for many more frugal living articles.
How have you changed the way you use credit as you have aged?