It's the beginning of a new year. Along with our resolutions for the future come those credit card statements to haunt us like the ghosts of Christmas shopping past. The perfect time for a conversation about managing credit cards as we age.
10 years ago, my wallet was simply packed with credit cards. There were gas cards, department store cards, specialty shop cards, major credit cards -- cards for almost every occasion, like a Hallmark Store.
Now, I carry 2 (plus one more at home in a safe place). I use the major credit card for everything except shopping at a discount club store, which requires their own.
Why the change? Several reasons. Some have to do with changes in how credit bureaus and lenders score or view credit. Others are really more about me than anything else.
It used to be that having a lot of cards was a demonstration of how well we could manage our credit. Assuming the balances were kept low, they implied we could resist temptation. Now, lots of open lines of credit can be interpreted as being a greater risk. That's because, despite managing things well in the past, the potential for accumulating debt quickly is not seen as a positive. This can lower credit scores which may result in higher interest rates on loans and credit cards.
Another issue is that lenders count up the monthly minimum payments when calculating our debt-to-income ratios. Lots of little accounts can actually amount to a higher level of payments. That's because minimum payments don't always reflect whether we owe $100 or $1000.
But the main reason I don't have as many credit cards is that they are too hard to keep track of (and keeping track of things seems to get harder every year). Lenders keep changing fees, moving the payment date and generally making it difficult to manage. One card for everything is simply easier.
I'm also concerned about what would happen if I misplaced my wallet or it was stolen. Having to contact all those lenders would just about max out my organizational abilities. One card/one call is much more manageable.
Of course, everyone's situation is different. This is just one approach. As with anything touching on finances, talking with trusted advisors is always the best first step in making any change.
Thoreau may have offered some of the best credit card advice out there, "Simplify. Simplify. Simplify."
Aging in Place, it doesn't happen by accident.
Scott Funk is Vermont's leading Aging in Place advocate, writing and speaking around the state on issues of concern to retirees and their families. He works as a reverse mortgage consultant. You can access previous Aging in Place articles at vermontfunk.com.