First, Happy Bastille Day, here’s Raoul Dufy’s 1905 ‘July 14th at Le Havre’ (Fridart Foundation):
Why pay more if you don’t have to?
A friend of mine is travelling in Europe. Before he left, we were discussing using credit cards while travelling. As it turns out, he has credit cards that charge foreign transaction fees. Ouch, that’s pay to pay. Not only that but the credit cards gave him zero cash back. Let’s examine how to avoid that retirement (or pre-retirement) bad surprise and even turn it to our advantage.
As a retiree, you’ll want to stay within your budget and as a pre-retiree, who can still get raises, you’ll want to increase your retirement savings. Properly used, credit cards may be able to help with that by:
-paying you cash back when you make purchases
-not charging you foreign transaction fees when you travel
-providing other benefits like extended product warranties, travel emergency assistance, and your FICO score.
Not for credit card souvenir purchases – a gold marten head (Northern Italy, 1500’s) from the Musee de Cluny in Paris:
Examine your credit
First, examine your credit. Do you pay off your balance in full monthly? Do you at least pay off all new charges in full monthly? If yes, you’re a candidate for credit cards to pay you. (If not, please Google techniques to pay off credit cards so you can avoid paying the bank before yourself.)
Check out your cards
Sign on to your card website(s) and look at your cards’ benefits. Are there fees that you are paying that you should not be – annual fee, foreign transaction fees? Are you getting cash back for purchases? If you’re paying fees or not getting cash back, it’s time to examine your cards, unless you really love the credit card issuer and want them to make more money. Legitimately, you may have an affinity card (Friends of the Siamese Cat Foundation! ) that has costs and they benefit – no problem as long as you have made an informed decision.
Does your card help you by providing:
- cash back
- no fees
- product warranties
- travel assistance
- chip/chip and pin?
Look for card advantages
Cash back can be a big one. Capital One is 1.5% on everything. Costco Visa gives 4% on gas, 3% on restaurants and travel (travel when purchased through their agency), 2% at Costco (makes that hotdog and pop $1.47 instead of $1.50!), and 1% on everything else. Amazon Visa is 5% on Amazon purchases, 2% on gas, restaurants and drugstores, and 1% on everything else. Discover has 1% on everything, but 5% on quarterly specials. USAA Visa has a chip/pin combo which can be helpful when traveling in Europe.
None of the above have foreign transaction fees. Interesting fact, I ordered some delicious essential Waitrose sugar-free bitter lemon juice for Mrs. NoSurprisesRetirement from the British Corner Shop , used the wrong card and ended up with a foreign transaction fee. Ouch – that card is now gone.
The cards? You can’t handle the cards. (A play on An Officer and a Gentleman)
What can you handle? An extreme carder (is there such a word as carder?) would have:
- Amazon card for 5% at Amazon and 2% at drugstores
- Discover card for the 5% quarterly cash back special
- Costco card for 4% on gas (anywhere!), 3% at restaurants, 2% at Costco
- CapitalOne for 1.5% on anything not on the above
- USAA for the chip/pin combo.
What’s in your wallet?
You’re probably not an extreme carder, so figure out what is most important to you and get cards that pay you for using them. Even if you just had one paying you back 1% and not charging foreign transaction fees, that’s a win. Remember, perfection is the enemy of the good.
Even if you have cards with benefits, please do not get carried away. Stay within the budget, pay the balance off monthly, and enjoy that percent.
Actions you can take include:
-Review your budget and make sure you’re either not paying interest on credit cards every month or you have a plan to get to not paying interest.
-Examine your cards and see if you are getting benefits or paying fees that you don’t need to pay.
-Determine how much of a ‘carder’ you want to be and obtain cards to optimize your percents back and no fees. Cancel cards you will no longer use.
-Use the card website to check your FICO credit score monthly.
And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here .
Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.