Many of us start each New Year by making resolutions to improve ourselves. These resolutions often relate to our health or spending time with our famines. Another common type of resolution relates to matters of personal finance. Since credit card debt and spending is an ongoing problem for many individuals, improving your credit card situation can be a great personal resolution for the coming year.
Reducing your level of credit card will likely be one component of your plan for the coming year, but there are also some other elements of your credit card spending and accounts that you may wish to focus on.
Here is some credit card advice for making the most of your credit card accounts in 2013.
Reduce Your Balance. Even though household credit card debt has declined slightly over the past couple years, the average debt is still approximately $7,000-$8,000. So reducing your outstanding credit card balance is probably a good place to start when making a new resolution. There are several different ways to prioritize your credit card repayment plans. One common technique is work to pay off the highest interest rate account first, thereby reducing the amounts you pay in interest charges each month by the greatest level. The financial benefits of this technique are clear. Another common technique is to work to pay off the lowest balance account first, and then continue with the next account until you’ve paid off all your accounts. Doing this can provide you with a psychological boost as you can quickly reduce the number of accounts that have an outstanding balance.
Change Your Spending Habits. Of course, the best way to make sure you realize the full benefit of any credit card balance reduction is to keep your balances low. If you work to pay down an account, but then spend back up to your prior balance levels after just a few months, then you haven’t really done yourself any long term benefits.
Negotiate Your Interest Rate Lower. Chances are fairly good that you’re not getting the best possible interest rate on all of your credit card accounts. For each of your accounts, call your credit card company and ask if they can lower your rate. If you’re willing to do so – and assuming you have another credit card with a lower interest rate – you might strengthen your negotiating position by stating that if you can’t get an improved rate then you would be willing to take your business (and transfer any outstanding balance) to a different credit card company.
Maximize the Benefits of any Rewards Program. Once you’ve reduced your outstanding balances and gotten your account to the lowest possible interest rate, identify ways in which you may receive benefits from using your card. Many credit card companies offer rewards programs that can provide financial benefits to cardholders, even if they pay their account balances off each month. Figure out how your cards can best benefit you in the coming year.
Finally, as you take control of your credit card spending and debt, you should have a plan to put the money you’re no longer paying in finance charges to a more productive use. Consider building up your emergency fund, adding to your child’s college fund, or perhaps saving more for retirement.
Tags: credit card advice, reduce credit card debt, reduce interest rate, rewards card