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You have more options to pay for things than ever before. You can write a check, hand over cash, swipe, tap or insert a credit card, and even use your phone as a digital wallet.
But when should you use a credit card — especially post-retirement? We spoke with a retiree who uses a credit card to cover 95% of his spending.
He explained why it works for him and his family and shared the rare occasions he uses cash. Keep reading to see if his financial system could work for you.
Why This Retiree Prefers Credit Cards
Doug Nordman, age 64, is the co-author of “Raising Your Money-Savvy Family For Next Generation Financial Independence.” He lives with his wife in Central Oahu, Hawaii. They’re financially independent and have been retired for over 20 years.
Nordman acknowledges that using credit cards to cover nearly all of your expenses may go against conventional personal finance wisdom.
“We’re keenly aware of the psychological effect of spending more with credit cards than we would in cash. [However], at this point in our lives we have our spending totally aligned with our values and priorities,” Nordman said.
Here are a few reasons why Nordman and his wife turn to credit cards almost exclusively.
Financial Simplification
“As my spouse and I get older, we’re perpetually seeking ways to simplify our finances. We’d like to think that we’ll be managing our money for at least another 30 years, but we also want our family to be able to step up at a moment’s notice. If our finances are [on] autopilot (and tracked with credit cards linked to financial software), then it’s much simpler for a caregiver to help out — especially if we’re in the middle of a health emergency,” Nordman said.
Ease When Traveling
When you travel internationally with cash, you have to worry about exchanging your bills and coins for the region’s currency. With a credit card, the exchange happens automatically and electronically, making transactions much simpler.
Nordman said, “When we’re enjoying slow travel in other countries, our cards are accepted nearly everywhere — at an acceptable exchange rate and without currency transaction fees. We carry a Visa card and an American Express card, and one of them is almost always accepted.”
Fraud Protection
If your cash gets stolen, you have very little recourse. The money is gone, and the thief can spend it at will with little risk of the fraudulent transactions being traced.
On the other hand, if your credit card gets stolen, you can call your credit card issuer and have them cancel it. The crook will no longer be able to use it, and you won’t be responsible for any bogus charges on your account.
“We keep a separate card dedicated to online spending and subscriptions,” Nordman said. “It’s less hassle to change that card if there’s online fraud. The card issuer texts me at every transaction (only a few times a month), so I’m immediately aware of problems.”
Rewards
Maximizing credit card rewards is less important to Nordman than enjoying the other perks described above. However, he uses his daughter’s Amazon card (with her permission!) when shopping on the retailer’s website, so she gets the 5% reward. Then, he reimburses her every couple of weeks.
Pro Tip: If you pay your balance in full every month, credit card rewards can help offset inflation — especially if your card’s bonus categories (such as groceries or gas) align with your regular spending.
When Nordman Pays Cash
While the bulk of Nordman’s expenses get charged to a credit card, he and his wife use cash in select situations, such as:
- Tipping staff at restaurants and hotels
- Paying contractors (if they prefer cash)
- Paying neighborhood teens for groundskeeping and painting tasks
- Paying younger kids for washing their vehicles
- Buying used cars (roughly once a decade)
In addition, “As part of [our financial] autopilot, our core expenses (mortgage and utility bills) are automatically deducted from our checking accounts. Some of our utilities still won’t accept credit cards,” Nordman said.
Should You Use a Credit Card or Cash?
Whether you pay with a credit card or cash is a personal and nuanced decision. However, it may be better to pay with cash if:
- You’re making a small purchase.
- You can’t pay off your card balance in full each month.
- You often overspend when using a credit card.
- You’re buying from a small business and want to help the proprietor avoid card processing fees.
- You can get a discount for doing so.
On the other hand, you might want to use a credit card if:
- You want to build a positive credit history and boost your credit score.
- You want the protection of your account, such as extended warranties and zero liability for fraudulent transactions.
- You can pay off the balance in full each month and are eligible for rewards.
- You’re traveling.
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