Seniors who’ve had trouble applying for credit cards, this will probably be the best news you’ve heard in months: two major local banks, DBS and OCBC, will now recognise CPF Life payouts as proof of income for credit card applications, with UOB soon to follow suit. This means that credit cards for retirees will be easier to apply for.
But there is a catch – only seniors aged 65 and above will stand to benefit, as that is the earliest age you can begin receiving CPF Life payouts from the money you’ve accrued in your Retirement Account.
This means for silvers who choose to retire early without steady income, a ten-year gap remains. Starting from age 55, people who apply for unsecured loan facilities like credit cards must show an annual income of at least $15,000 in salary, rent, dividends, interest or annuity payments.
They can also provide bank statements proving total net assets in excess of $750,000 or apply with a guarantor earning an annual income of at least $30,000.
Depending on your specific retirement situation, these criteria can be difficult to show, even if you’re happily retired without financial worries (as with a recent case in the local newspaper of a senior who had his credit card cancelled after applying for a spending limit increase).
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Why should seniors get credit cards?
Credit cards are one of the world’s widely used financial tools for a reason. They are accepted almost universally in restaurants, cafes and even street stalls, and can be used in lieu of transport cards in many countries. They also come with a slew of rewards like cashback and miles.
Best of all, credit cards afford an additional layer of protection compared to debit cards, as you can initiate chargebacks on unauthorised and unfulfilled transactions. They are also generally easy to deactivate with most modern banking apps.
While there is a risk of spending beyond your means, the credit limit for seniors with an annual income of $15,000 is just $2,500.
If you push it further to between $15,000 and $30,000, you can spend up to two times your monthly income. To help you stay on track, you can set automatic GIRO payment via your bank.
Why is the recognition of CPF Life payouts as proof of income good news?
Before this bit of good news, local banks had already accepted CPF Life payouts as proof of income on a discretionary basis.
This formalised announcement merely sets the acceptance of our retirement payouts in stone – while hopefully, signalling future intentions to consider assets like CPF balances when assessing our eligibility for credit cards (another issue faced by the senior from earlier).
How much do I need in my retirement account to get $15,000 a year?
Assuming you’re relying only on CPF Life payouts for an annual income of $15,000, you’re looking at a monthly payout of $1,250.
According to the CPF website, this works out to around $150,000 in your retirement account by age 55, roughly halfway between the Basic ($106,500 for people turning 55 this year) and Full Retirement Sum ($213,000).
Best credit cards for retirees
The best credit card for you depends on the kind of retiree you are. There are cards suited for senior globetrotters, online shopping power users and supermarket specialists, each with their own benefits and drawbacks.
Not all of the cards listed here come from the three banks, which’ve made their announcement, as we’re confident that more will follow in their footsteps in the months ahead.
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UOB EVOL Credit Card:
A straightforward cashback card for rewards on online, mobile contactless and overseas in-store foreign currency spend.
What we like most about it – a guaranteed annual fee waiver if you make at least three transactions a month, and a better savings rate if you park your money in the bank’s UOB One savings account.
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Trust Link Credit Card:
While Trust Bank is relatively young, there’s plenty of things going for its Linkpoints-focused credit card, especially if you’re a fan of the FairPrice Group ecosystem (Fairprice, Unity, Kopitiam and Cheers are the bigger names among them) and Caltex (where you’ll get a substantial discount coupled with more Linkpoints).
The best part? Free rice! Just kidding – there’s no annual fee and foreign transaction fee (yes, even the customary 1% Visa charge), meaning it’ll work perfectly fine as a no-frills travel card.
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OCBC Rewards Card:
If you love shopping at department stores, the OCBC Rewards Card is probably the credit card for you.
It boasts attractive spend-to-point ratios for pharmacy giant Watsons and other online or in-store retail, which means plenty of opportunity to rack up points and convert them to miles, vouchers and more. The annual income requirement is approachable at $30,000 per annum, with guaranteed annual fee waivers for the first two years.
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Citibank Cash Back+ Card:
A travel cash back card that’s as simple as it gets with a flat 1.6% cash back rate with no minimum spend or caps on cash back earned.
For some bonus peace of mind, you also get coverage of up to $1 million when charging travel tickets to the card – what’s not to like?
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DBS Woman's World Card:
An all-around excellent card for cash-rich seniors who want to maximise the miles they get from online shopping and travel, with complimentary e-commerce protection to boot.
Despite its name, both men and women can apply for this card, so long as they’ve got the income of $80,000 a year to afford it (there’s also the basic Woman’s Card, which only has perks for online shopping).
