From picking the best perks to securing the right credit limit, here’s everything you need to know on how to use credit cards in retirement.
The Bank of America content was last updated on January 3, 2023.
When air traffic controller Jonathan Look retired seven years ago, he wanted to see the world.
So far, he’s visited Mexico, Laos, Cambodia, Thailand and Portugal. Next on his itinerary: Greece and Argentina. He also blogs about his travels at LifePart2.
When Look evaluates credit cards for his new, post-retirement life, he’s looking for rewards that will offset the cost of travel, a few travel perks and no foreign transaction fees.
Look’s advice on using credit cards in retirement: “Keep it simple,” he says. “You don’t need many, but you need a few.”
Are you searching for ways to make the most of your credit cards during your current or upcoming retirement? Whether you’re an adventurous world traveler or a happy homebody, here are seven pointers to help you use your cards strategically when you retire.
Tips to maximize your credit cards during retirement
If you want to make the most out of your credit cards in your golden years, consider following these tips:
1. Plan ahead to pay off balances
“We are seeing an increase in credit card debt balance carried by older people,” says Lori Trawinski, CFP, director of finance and banking with the AARP Public Policy Institute.
According to a 2022 survey from The Senior Citizens League, about two in five seniors (43%) carry revolving credit card debt.
No matter how good a deal you’re getting on points and rewards, you’re not making any money if you’re still carrying a balance on your cards.
Paying off balances is crucial if you want to squeeze the most out of those miles, rewards and cash back cards in your golden years.
2. Choose perks that align with your new lifestyle
When you’re retired, freebies and discounts are gold. And they’re even more valuable for those who love to travel.
For retiree Denis Gagnon, card perks that used to be considered “premium” – such as no foreign transaction fees, trip insurance and car rental insurance – are now his minimum requirements for a travel card.
In the U.S., places that accept Visa usually accept Mastercard and vice versa. In other parts of the world, that’s not necessarily the case, says Look, who uses his Barclaycard Arrival Plus World Elite Mastercard®* as a Visa alternative.
Make sure you look for cards that have wide acceptance in the parts of the world – or country – you plan to visit.
3. Get a credit limit increase before you retire
Credit limits are based on your credit score and your income. After you retire, that income will likely go down – or, for card issuers, it may be more difficult to verify, says Andy Byron, CFP, president, senior financial advisor and principal with HC Financial Advisors.
It might be wise to ask your issuer for a credit limit increase before you retire. But also realize it’s a delicate balancing act, since too much “available credit” can sometimes scare potential lenders.
4. Use all your cards regularly
Good credit is like a muscle: Use it or lose it.
Retirees often do one of two things when it comes to credit cards: They use them all the time or they don’t use them at all, says Keith Feinberg, CFP, chief operating officer and wealth strategist at Seven Mile Advisory.
His advice: Avoid either extreme. Racking up balances isn’t healthy. And if card issuers see you haven’t used a card for a few months, they could close the account, which might result in a credit score drop.
Feinberg’s solution: Charge one small thing – even if it’s just a pack of gum – every month to keep the cards active.
5. Don’t let ‘balance creep’ steal your peace of mind
In retirement, annual income is often reduced, so staying out of debt becomes that much more critical.
At this stage, even if you have an investment account, “it’s not going to pay you 12%” says Byron. So, rolling a card balance even on a relatively low 12% APR is a losing proposition for retirees.
Instead, the key to getting the most out of credit cards in retirement is exactly what you learned in your working life: Treat cards as a convenient payment method, not a loan. This means charging no more than you can afford to pay off every month.
The problem with that? You’re enjoying new activities and a different income, so it can be difficult to gauge – especially at first.
6. Choose cards more carefully
In retirement, you’re less likely to want to close and open cards, says Byron. So, when you apply for a new credit card, it’s important to make sure it’s one you want to keep.
This means that it’s crucial to research whatever card you want and read the fine print before you apply.
Are you in the market for a new travel card? Ask yourself these questions:
- Do your favorite picks offer miles that are applicable or transferable to a carrier you fly?
- Does the card forgo foreign transaction fees?
- Does it offer other perks that will help in your travels – such as hotel rewards or discounts and help with lost luggage, delays or travel glitches?
7. Talk to a financial advisor
You’re navigating an exciting new landscape. Ideally, you’ve built up some assets and may have a retirement account or pension. And you may be planning trips, moves, new business ventures or a return to school.
“One of the things that people can do is work with a financial planner,” says Trawinski. “Certified financial planners have a fiduciary duty to their clients.” A check-in with a financial planner can help you shore up any holes you might have in your plan and draft a budget that will keep you on track and out of trouble.
That checkup can give you an X-ray of your money situation, income, assets, estate planning and even the holes you need to plug (and some possible solutions). “All the aspects of your finances would be examined,” says Trawinski.
A financial planner can also help you create a budget for your new life and help you come up with a savings plan for those unexpected expenses.
The key for your cards: Once you know how much is coming in and what you can afford to spend, you’ll know just how much of that spending you can safely put on cards. And you’ll have the security of knowing you can pay it off in full every month.
Best credit cards for retirement
If you’re looking for a new credit card in retirement, here are some solid options, all of which come with no annual fees:
If you want a balance transfer card
If you’re entering retirement with card balances, maybe what you need is a balance transfer card with a long 0% APR intro rate to help you pay them. A balance transfer card with an introductory 0% interest offer would enable you to pay off your balance sooner without paying extra interest.
One good choice is the Wells Fargo Reflect® Card, which offers a 0% intro APR for 18 months from account opening on purchases and qualifying balance transfers that you make within 120 days (then a variable APR of 17.24% to 29.24%). And you can even get a three-month extension on that offer if you make at least your minimum payment on time during the intro period. You’ll pay an intro balance transfer fee of $5 or 3% of the amount of the transfer (whichever is greater), up to 5%, $5 minimum.
Another great balance transfer card option is the BankAmericard® credit card, which will give you a 0% APR on purchases and balance transfers for 21 billing cycles (followed by 16.24% to 26.24% variable APR), as long as you do the transfer in the first 60 days. A balance transfer fee of 3% (or a minimum of $10) applies.
If you want cash back
There are quite a few good cash back credit cards on the market, so it might be hard to choose just one.
A standout among cash back cards, the Wells Fargo Active Cash® Card will earn you unlimited 2% cash rewards on your purchases. You’ll also get a $200 cash rewards bonus if you spend $1,000 in the first three months. You won’t pay an annual fee or and you’ll also get 15 months from account opening of 0% intro APR on purchases (and qualifying balance transfers), after which your rate will be 19.24%, 24.24% or 29.24% variable.
Another winner is the Capital One SavorOne Cash Rewards Credit Card, particularly if you want to dine out or kick up your heels. You’ll earn 8% cash back on Capital One Entertainment purchases, plus unlimited 3% cash back on dining, entertainment, popular streaming services and at grocery stores (excluding superstores like Walmart and Target). You’ll earn 1% cash back on everything else.
If you want points for gas
At home, Gagnon reaches for the Costco Anywhere Visa® Card by Citi because it gives 4% percent cash back on eligible gas and EV charging purchases for the first $7,000 per year (then 1%), 3% on travel and restaurants and 2% on Costco purchases. It doesn’t come with an annual fee or charge foreign transaction fees but cardholders must have a Costco membership, which starts at $60 per year.
One of Feinberg’s clients picked the Chase Freedom Flex℠ because the quarterly points bonus on gas coincided with his snowbird trip south for the winter – and he banks those rewards for the year. This one doesn’t charge an annual fee and rewards cardholders with 5% cash back on rotating bonus categories for up to $1,500 per year (must activate categories). You’ll also get 5% back on travel you purchase through Chase Ultimate Rewards, 3% on dining and drugstore purchases, plus 1% back on everything else.
If you want a travel perks
If your plan is to travel during retirement, why not get rewarded for it through your credit card? You won’t pay an annual fee or foreign transaction fees with the Capital One VentureOne Rewards Credit Card but you’ll reap rewards such as 5X miles on hotels and rental cars you book through Capital One Travel and 20,000 bonus miles (equal to $200 in travel) just for spending $500 in the first three months. You’ll also earn unlimited 1.25X miles on every purchase you make.
Another attractive travel card with no annual or foreign transaction fees is the Discover it® Miles, which matches all the miles you earn during your first year. You earn unlimited miles on every dollar you spend and your numerous redemption options include cash, statement credit or purchases such as airfare, hotels, rideshares, gas stations, restaurants and more – all with no blackout dates.
When you retire, you likely won’t be spending money as freely as when you were working. But being strategic with your credit card usage can help you make the most of your cardholder perks and enjoy your retirement at the same time.
*All information about the Barclaycard Arrival Plus World Elite Mastercard has been collected independently by CreditCards.com and has not been reviewed or approved by the issuer.