A credit card is not just for high-income groups. There are many offers that appeal to people on a smaller budget. Pensioners can also apply for a credit card and benefit from it in many ways.
Benefits of a credit card for retirees
Credit cards are much more widely accepted than EC cards, especially on the Internet and abroad. If you order a lot on the Internet, you can also use a credit card as a pensioner. Offers can be used not only by the house bank, but also by other financial institutions. If you plan correctly, you don’t take any chances. Generally you have the choice between a classic and a prepaid credit card.
Classic credit card features
As the name suggests, you buy goods or services on credit with the classic credit card. This means that you are spending money that you do not have when you use your credit card. This is how it works: You get the credit card from the card-issuing institute with a so-called credit limit, which you can exhaust every month.
The amount of the credit limit depends on your credit rating. Sometimes you have to provide proof of income, but the credit card is often only issued according to the Credit bureau rating. Credit institutions start a query. For example, if your score is 100% because you have not taken out any loans and have not entered any other liabilities, you can also get a credit card with a limit of several thousand USD as a pensioner with a small income, even if you only have a small one To draw a pension. The limit is fully available to you. This means that in theory you can spend USD 3,000 in one month, even if your pension is only USD 1,000.
The repayment modalities of a classic credit card are flexible. There are usually two ways to repay the amount you used:
1. Redemption of the entire amount on the balance sheet date
The credit card sales you have made are invoiced once a month. The cut-off date for many banks is around the 20th of the month. The amount is debited five to seven days later. The money is collected from your checking account, with the total amount being collected once. Your current account must be covered with the necessary amount.
Advantage of this payment method: You only pay interest for a few days a month and always keep an overview of your expenses. Disadvantage: You have to have the total amount available at the end of the month.
2. Redemption of a partial amount by payment in installments
You pay off the amount used on the credit card in installments. As a rule, the credit institutions require a minimum financing amount of three to ten percent of the amount used. However, you can also set a rate, which may exceed the minimum requirement of the credit institution.
Advantage of this payment method: You benefit from an individual and very flexible repayment that adapts to your wishes and options.
Disadvantage: High interest rates of often more than ten percent and the risk of losing track and getting into debt.
No debt with the prepaid credit card
Fear of debt or high interest rates are no reason to forego the advantages of a credit card. Many financial institutions offer a so-called prepaid credit card. This works in a similar way to a savings book: you deposit an amount into the card account and can freely use it. When the amount is used up, the payments are rejected. The other advantages of this solution are that you always have a very good overview of your expenses and that you do not have a high interest charge. Some banks even give interest on the credit you have on your prepaid credit card. The disadvantage is the annual fee, which is between USD 20 and USD 50 depending on the bank.
It is advisable to order the prepaid credit card from a well-known bank. There are also offers on the internet and at petrol stations. You buy a credit card with a starting credit and then top it up regularly. In practice, however, these prepaid credit cards are not accepted by all acceptance points. With a card from a well-known bank, on the other hand, you will have no problems paying.