Everything About Credit Cards

Using credit cards for some people is absolutely essential in getting through each month until they get paid. So long as you are either paying off the balance or meeting the monthly minimum payment they do not present any real problem, unless you run up to high a balance or start getting multiple cards from different companies. However when you stop working and are in retirement, by definition, there is no payday, which often means the balance just keeps increasing. Since the start of the financial crisis back in 2008, credit and credit cards have become more expensive to use due to the card companies increasing the APR interest rates. So retired people with no ‘salary’ may find it increasingly difficult to keep the balance down on their credit cards. Below we talk about what alternatives there are to relying on credit cards in retirement.

Equity Release Plans

If you do find you do not have a sufficient income in retirement then rather than burdening yourself with extra debt on a credit card, you could release the money tied up in your house and take an Equity Release plan. These are only suitable for homeowners over the age of 50 but this does still encompasses quite high proportion of retired people. Your are essentially ‘swapping’ some of the value of your property in exchange for a lump sum and/or annual income depending which sort of plan you choose. This means when you get the money you can pay off your credit cards and then start to live within your budget each month.

Borrow from relatives / friends

You may find you need to buy a big ticket or unexpected item one month. Rather than finance this on credit, why not see if someone else in the family will offer you the money as a loan. A typical APR on a credit card is around 18% which means you will end up paying a lot more back if you don’t clear the balance right away. A relative or friend is much more likely to lend to you at a reasonable rate, if at all.

Find a credit union

Some high street short-term loan companies offer interest rates that will make you fall off your chair. It is not uncommon to see APR interest rates above 1000% or more which is why these are not a viable alternative to using a credit card. However using a credit union will ensure you get a loan at a much more competitive rate.  You should borrow from a credit union only when the purchase is essential, do not use them as you would a normal credit card as you will be no better off in the long run.

These are three useful ways to that can help you to reduce your reliance on credit cards. However the best way to achieve this long term is of course to reduce the amount you spend. Credit cards are often colloquially termed as the ‘Never, Never” as many cardholders never pay off the balance. This is more of a problem if you are a retired person so it is worth thinking about how you can use them less.

Author info: Composed by Simon who writes for the pension company Annuity City. Visit them now and use their pension annuity calculator

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