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Most financial experts caution consumers against the dangers of credit card debt, and this warning rings particularly true for retirees. Seniors living on a fixed income may be tempted to rely on the ease and convenience of this “purchase now, pay later” option, but there are several factors that should be weighed to avoid costly mistakes. Americans are deeply in debt. According to a recent survey by CardHub, the average American household has a credit card debt of $7,200.

The Pros and Cons of Credit Cards

There are both advantages and disadvantages to using credit cards while in retirement, depending on one's unique financial situation. Kenneth Strauss, a Florida-based CPA/PFS, says it’s usually best not to have any credit card debt. Further, he says those with balances should devise a plan to pay off their balances.

At the same time, Strauss says there are benefits to using a credit card, if the balance is paid off each month. He says that many credit cards offer points that can be used for hotel stays and airline flights. “Some airline-branded cards also offer free checked baggage, which can save the traveling retiree significant dollars.”

New York City-based financial attorney, Leslie Tayne of Tayne Law Group, agrees and tells Investopedia that retirees who fly frequently can invest in an airline credit card. “By using this reward card, they can receive frequent flyer miles, and if they save enough miles, they can potentially get a free flight,” says Tayne. She says this is just one example of how retirees can receive rewards and even cash back from using their credit card on a regular basis.

Tayne says that credit cards can also help retirees maintain a good credit score, which will be important, especially if they decide to refinance their mortgage or buy a vacation home.

However, since retirees are living on a fixed income, they need to pay close attention to the terms of these cards. Sean Stein Smith, a New York City based-CPA, warns retirees to pay attention to fees, interest penalties, or annual charges associated with the card. “Such items may be present in the fine print of the application, but can really eat into your income as well and also limit the functionality of the credit cards themselves,” says Smith.

Further, Tayne advises retirees to consider their ability to pay off the balance each month. “You may end up relying on the credit card more often than ever to purchase essential items for your home or medications; however, if you do not have the money to pay off the full balance on your credit card, you can find yourself with excess debt.” For example, a retiree with a $5,000 credit card balance, paying $125 a month at 18% interest would end up making 273 monthly payments and $6,923.14 in interest.

That’s why Chris Hogan, money and retirement expert for Dave Ramsey's team, cautions Investopedia readers against credit cards. “No amount of ‘perks’ can make carrying credit card debt worthwhile, and Consumer Reports says 75% of airline miles are never redeemed,” says Hogan. Even among those who consider themselves to be “responsible” credit users, Hogan says there’s always a risk of incurring debt. “Retirees should be focused on building their nest egg, not breaking it: the risk is simply not worth it," concludes Hogan.

The Pros and Cons of Credit Card Debt Consolidation

So what about retirees who have already amassed credit card debt? Is credit card debt consolidation a good idea? Well, if they choose this route, Tayne says they can potentially get a lower interest rate and also get the annual fee waived. “You can seek out this option if you have a positive track record in easily paying your credit card and making payments on time, but if you have a spotty payment record with a low fixed income, you may get rejected,” explains Tayne.

And Hogan warns that debt consolidation is merely a short-term solution for a long-term problem. He says that retirees are merely shuffling the debt around if they don’t change their behavior. “The debt is still there, as are the habits that caused it, and this is why most people just go deeper into debt after consolidation,” explains Hogan.

Instead of consolidating credit card debt, he recommends that retirees use the debt snowball method. “List your credit card debts from smallest to largest, and make minimum payments on all of them except the smallest bill.” Hogan advises paying as much as possible on the smallest bill to pay it off. Once the smallest bill is paid off, apply those funds to the second smallest bill until it is paid off. By systematically paying off each bill and taking the money saved to pay the next bill, retirees are creating a snowball effect. “Once you're debt free, you'll be able to focus on leaving a legacy for your family instead of paying for your past," says Hogan.

The Pros and Cons of Using Retirement Income to Pay Off Credit Card Debt

Some retirees may be tempted to just use retirement income to pay off their credit card debt, but our experts don’t recommend this practice. Tayne reminds readers that they need this money to live on. Also, she says that they may incur an early withdrawal tax penalty, and advises retirees to seek help and advice from a debt counselor or financial advisor.

And even if there isn’t a penalty for early withdrawal, Hogan warns against it and says that retirees are limiting growth opportunities by withdrawing funds. “Every dollar you send to the credit card company steals from your future and your retirement dreams.” Instead, Hogan recommends getting a part-time job or making lifestyle sacrifices to help pay off the debt.

The Bottom Line

Credit card debt can be a financial strain at any age, but it can have a significant impact on retirees on a limited income. While judicious use of credit cards can help retirees gain rewards and maintain a good credit score, carrying a balance is counterproductive. At the same time, using debt consolidation and retirement income may only result in short-term solutions, so retirees need to carefully weigh their options.

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