Seniors today have to face many credit options never before presented to people in their age group. Many of these seniors - widows in particular who may not have worked, owned a credit card, or been responsible for a loan before reaching the senior years – may not be prepared for the slew of credit offers dumped on them. Most of these credit offers advertise amazing benefits – without explaining the costs and penalties associated with those benefits. This primer will help guide you through wise credit choices.
• Choose your credit card carefully. It’s best to have one or two major credit cards – meaning cards carrying a well-known name such as MasterCard, Visa, Discover Card or American Express. These cards carry weight in the financial world and are reliable and respected on your credit history.
• Collect offers from several credit cards and compare them before accepting one. If need be, have a younger friend or relative wade through the piles of card offers with you before you choose one.
• Refuse the urge to sign up for a lot of cards. You only need a couple cards. The more cards you have, the more you have to keep track of. Keep it simple. Maybe carry one in your purse or wallet, and keep one at home in a desk drawer or home safe in case you ever lose your purse or wallet.
• Watch out for “teaser” rates. These are zero percent or low interest rates that only last for a short time. After the teaser rate time period is up – usually a few months to a year – the card usually changes to a high interest rate.
• Check for fees. Get someone to read the fine print looking for annual fees, fees related to transferring balances, and late fees. Make sure you know what fees you might be charged before you sign.
• Make sure you understand “variable” rates if you are considering a variable rate card. This means the interest rate will vary. Sometimes variable rates go up quite high. Make sure you are protected from this.
• Be sure you understand the credit card’s billing cycle and late fee policy. Then set up a plan for paying the bill every month so you don’t get caught with late fees. Late fees on credit cards are very expensive, and late payments negatively affect your credit rating, so making late payments is double trouble.
• Make sure you pay more than the minimum payment, or you’ll end up paying a lot more money in the long run. Remember the interest you’re paying on those credit cards is eating away at your retirement savings. Make sure you’re not paying extra money out in interest on those credit cards by paying off the whole balance each month if possible.
• Check the extra services offered with your credit card carefully. Usually these services – such as credit card protection and anti-fraud protection – are highly priced and not needed.
If you are new to using credit, be sure not to run up a higher bill than you easily pay off. Credit is a necessary evil these days; just make sure you use it wisely!
