Understanding Credit Cards

Most seniors in the U.S. have at least one credit card. These are basically plastic or metal cards that allow individuals who use them access a line of credit for purchases.

Credit card holders can take advantage of credit cards in many ways. For instance, credit card holders can purchase more expensive items they would not be able to buy otherwise by allowing users to make more flexible payments.

Moreover, credit card users can maintain good credit history by making payments on time. They are also likely to obtain a credit card limit increase when they have a good credit score. However, they must also meet certain requirements established by the financial institution that provides the credit line. Senior applicants can gain a deeper insight on this and other important facts about credit cards by reviewing the sections below.

Learn About Credit Limits

This line of credit is determined by a credit score that reflects an applicant’s credit history. For instance, senior applicants just like any others may have an extensive credit history or none at all.

Applicants should understand their credit report, as it influences factors such as approval rates as well as credit card limits. For instance, an issuing financial institution will determine a credit limit that the credit card user can access to make their purchases. Users cannot purchase anything once they reach the credit limit of their credit card.

Learn About Credit Scores and Credit Reports

There are multiple differences between someone’s credit score and credit report. Credit scores reflect the information contained in credit reports. Three different credit bureaus establish the score based on an individual’s credit history.

Factors such as timely payments, the period that a person has had credit, number of hard inquiries and other aspects influence the credit score of an individual. Credit card applicants should take a look at their credit report, which includes more detailed information about each one of these factors.

They can access one free report by each of the bureaus per year, but some financial institutions offer free reports from time to time or after a credit card application. Applicants should consider applying for a credit card after they have carefully reviewed their credit report and understand their credit score. This will increase their odds of applying for a credit card that the applicant is more suited for based on his or her credit history.

How to Apply for a Credit Card

Financial institutions have different eligibility requirements to approve applicants for a credit card. The type of credit card that applicants apply for also affects their odds of approval. However, an applicant credit score is one of the most important factors influencing the approval decision by the financial institution.

Furthermore, seniors should consider their needs and then review the extra benefits a credit card offers. Types of benefits that come with different credit cards include the following:

  • Promotional interest rates
  • Automatic credit line increase after a specified time
  • Cash back on qualifying purchases
  • Travel rewards
  • Points for purchases or loyalty programs

Seniors should consider these and other factors to help them choose which credit card to apply for. Once they have their options narrowed down, seniors should always apply for credit cards in a secure way.

There are many ways to apply for credit cards, but the most convenient one is online. Financial institutions have websites that are a one-stop shop for applicants to review important information about a certain credit card, apply for it and access several other resources all in one place. However, senior applicants must carefully verify each website they use as they will be asked for important personal information as well as their Social Security Number.

Moreover, applicant information about income, credit score and other factors will determine the approval or denial of their application. Applicants may be notified instantly or after certain period of time if the financial information needs to review the information that they submit.

How to Maintain a Credit Score

Seniors who use a credit card may be used to making timely payments, but it is important that they keep this habit throughout their credit life. Credit card holders will avoid penalties by making payments on time. Any missed payment for more than 30 days is likely to reflect on an individual’s credit history.

Credit card holders should also keep an eye on the amount they owe on their single or multiple credit cards. Keeping the balance below 30 percent often leads to better credit scores. Seniors should also familiarize themselves with online tools available for them to keep track of their spending and other transactions.

Moreover, seniors should understand that at some point in time they can become “credit retired”. This means they basically do not have a credit score. This is very common for seniors who have paid off all of their debts and are not interested in applying for new credit cards, loans or anything else that impacts their credit score. In order to generate a score, senior and any other applicants must satisfy all of the following:

  • Have an account that is at least six months old
  • Have one of their accounts updated in the past six months by a lender or a creditor
  • Must not have a death notice on file

Senior applicants often do not satisfy the second of these requirements due to inactivity. There is very little interest for comfortably retired senior citizens to open new accounts. Many of them have also formed alternative spending habits from using their credit cards. For instance, many senior citizens use their savings or retirement funds and make payments using cash or a debit card.

However, seniors should consider maintaining a credit score for multiple reasons. For instance, they might want to relocate to senior housing or get new utility services. These institutions often check a customer credit score as a requirement to provide their services. For this reason, seniors should consider the following to maintain an existing credit score:

  • Getting a secured card
  • Use a credit card for small expenses such as gas or groceries
  • Have automatic bills charged to a credit card

Learn About the Cost of Having a Credit Card

Credit card applicants should understand that having a credit card comes with a cost. Most of the time the cost of having a credit card is expressed in interest rates. These refers to a percentage charged to the balance owed in the credit card.

For this reason, senior applicants should consider applying for credit cards with promotions on Annual Percentage Rates. Otherwise, they should keep a low balance for credit cards with higher interest rates. Moreover, other fees for late payments or annual fees may also exists. Cardholders can avoid late fees by setting up automatic payments from their senior checking accounts.

Seniors should carefully review their credit card terms and conditions to understand the different payments they make to the financial institution issuing their credit card. This will help them make other important decisions in choosing a credit card that is best suited for them.