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Maximizing credit cards during retirement

March 16, 2020
5 min read

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Being retired can offer you the time that you've always wanted to travel far more than you could when you were part of the workforce. You spent years (decades) saving up for retirement. After all that hard work, it's time to enjoy yourself and think about retiring early. And as regular TPG readers know, credit cards can offer you the chance to earn valuable travel rewards and benefits.

But once you retire, you'll be in a different financial position than you were when you were working. Thankfully, reward credit cards can remain a viable option for retirees, so long as you use them correctly.

Here are some tips to getting the most from your credit cards during retirement:

Maximize your chance of approval

Some people believe that they won't be approved for new credit cards accounts once they've retired, but that's rarely the case. When considering an application for a new account, credit card issuers are willing to consider nearly all forms of household income. This can include disbursements from retirement savings accounts, investment income and any residual income you still earn from part-time or small business employment. You can also include your Social Security benefits as well as any pensions you receive, including military retirement benefits.

And don't forget that credit card applicants are always allowed to include their entire household income, so long as they have a reasonable expectation of access to it for the purpose of repaying a loan. That means that you're free to include all of the income sources of your spouse or domestic partner when you apply for a new credit card account. By including all eligible sources of household income, you'll increase your chance of approval while receiving a sufficient line of credit. For more information, read How to Apply for a Credit Card.

(Photo by vorDa/Getty Images)
(Photo by vorDa/Getty Images)

Avoid all debt

Credit cards are an excellent method of payment that can offer you valuable rewards and benefits. But all of this value can be effectively lost when you carry a balance and incur interest charges. And while all credit card users should strive to avoid interest charges by paying their statement balances in full, this is especially true of retirees on a fixed income.

You should only have as many credit card accounts as you can manage responsibly, which means paying your bills on-time and avoiding carrying a balance. But if you can manage these two key responsibilities, then retirees are free to earn as many points and miles as possible.

(Photo by MoMo Productions/Getty Images)
(Photo by MoMo Productions/Getty Images)

Look for long-term value

Having helped many retirees with their award travel strategies, I've found that they prefer a simple and steady approach to award travel rather than trying to quickly earn and spend large chunks of points and miles. If this is your strategy, then you should focus on cards that offer fantastic long-term value, but not necessarily the highest initial welcome bonuses.

For example, the Amex Everyday® Preferred Credit Card from American Express currently offers 3x points at supermarkets and 2x points at gas stations in the U.S. on up to $6,000 per year in annual purchases. Plus, when you use the card to make 30 or more purchases in a billing period, you get 50% more points. This means that you can earn a very strong 1.5x points per dollar spent on non-bonus purchases, as well as 4.5x at supermarkets and 3x on gas in the U.S. on up to $6,000 per year in annual purchases. These Membership Rewards® points are valuable, as they can be transferred to miles with numerous frequent flyer programs, and even to hotel points.

(Photo by CasarsaGuru/Getty Images)
(Photo by CasarsaGuru/Getty Images)

Maintain your excellent credit

Your good credit is just as important to you in retirement as it was before. Fortunately, the formula for keeping your credit score high is extremely simple: Pay your bills on-time and avoid debt. One way to ensure that your bills are always paid on-time is to enroll in auto-pay, which nearly every credit card issuer offers. Most will allow you to pay your entire statement balance on the due date, which will ensure that avoid interest charges. Of course, it's up to you to make sure that you have the funds available in your bank account when the payment is processed.

(Photo by Klaus Vedfelt/Getty Images)
(Photo by Klaus Vedfelt/Getty Images)

Bottom Line

I've always found that the award travel bug seems to equally affect people of nearly every background, including retirees. By finding the ideal credit cards for your needs, and managing them responsibly, you can spend your retirement years seeing the world for far less money than you might have thought.