Most seniors head into retirement hoping to have no debt. While this is definitely a good strategy, it doesn’t mean that seniors should head into retirement without any credit cards. Credit cards can be extremely useful in retirement—and they won’t necessarily mean disaster for your savings, as long as you know how to manage them. Let’s look at three important reasons you may want to keep your cards—even after you zero out their balances.
- Emergencies. You don’t get to time your emergencies. When you need money for a big expense, it can force you to liquidate holdings at the worst possible time. With a credit card, you can charge the expense, pay a little bit of interest over time, and control when you liquidate your holdings so the timing is in your favor. While this might cost you a little bit in interest, it could save you from realizing a very big investment loss.
- Interest-free opportunities. You might have enough money to pay for your big-ticket purchases outright, but if you take the money out of your savings, then it’s no longer earning interest or growing with your investments. Instead, it can be a better approach to use interest-free financing offers on store credit cards to make small payments over a few months and let the bulk of your money continue working for you. Just make sure you’re ready to make payments on time so you don’t get any late charges or interest fees.
- Rewards. If you have the discipline to use your credit cards strategically and pay them off each month, you could accrue important cash-back and travel rewards that save you a lot of money over the long term. Before using a card for rewards, make sure you fully understand the terms and conditions for getting and using the rewards.
Credit cards are a tool, and like any other financial tool they can serve a purpose. Use them to make your retirement more comfortable and to make more strategic decisions with your money.