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Using credit cards responsibly can be an excellent way to get rewards and perks with your everyday spending, but if you’re not careful, it can also lead to crippling high-interest debt. It’s always a good practice to review your financial situation and create resolutions to better it. Here are five credit card resolutions to consider adding to your list.
1. Check Your Credit
If you’re hoping to take advantage of new credit card sign-up bonuses, rewards and perks, you’ll want to make sure your credit is good enough to qualify. Knowing and taking steps to improve your credit (if necessary) are also important if you need to borrow money for other reasons.
Start by checking your credit score through Experian or Credit Karma. Both services offer free access to your credit score, though Experian’s is a FICO score while Credit Karma’s is a VantageScore. Lenders are more likely to use your FICO score in lending decisions, but it doesn’t hurt to gather as much information as possible about where you stand.
These services also give you information on your credit reports, which can help you determine which areas to address if you need to make improvements.
2. Make a Plan to Pay Down Your Debt
If you carry a balance from month to month on one or more of your credit cards, paying it down should be a top priority. There are several ways to pay down credit card debt. Among the more effective options include:
Balance transfer credit cards
Balance transfer cards allow you to transfer some or all of your balance from another card, then pay it off interest-free for a set period. Some cards like the Citi® Diamond Preferred® Card, from our partner Citi, offer long-term 0% APR. The catch with most balance transfer cards is that you typically need good or excellent credit to get approved, which starts at a FICO score of 670. Also, most balance transfer cards charge an upfront balance transfer fee, which can range up to 5%, depending on the card.
Debt consolidation loan
You can use a personal loan for a long list of reasons, but one of the most popular ones is to pay down credit card debt. You won’t get a 0% APR promotion, but personal loans charge a lower average interest rate than credit cards, and they’ll also give you a set repayment schedule, which credit cards don’t offer. Just keep in mind that your credit will need to be in solid shape to get approved for favorable terms.
Debt avalanche or snowball method
These approaches can be worth it if you have balances on more than one card. With the debt avalanche method, you’ll make just the minimum payment on each credit card except for the one with the highest interest rate. You’ll make additional payments on that card until it’s paid in full. Then you’ll take what you were paying on that card and apply it to the card with the next-highest interest rate, in addition to its minimum payment. You’ll keep doing this until you’ve paid your debts in full. The snowball method takes the same approach, but targets cards with the smallest balances first.
Consider all of your options to determine the best approach for you.
3. Double-Check Your Spending
If you’re hoping to maximize your credit card rewards, it’s imperative to have a good idea of where you spend the most. For example, if you eat out a lot instead of cooking for yourself, you may want a credit card that offers bonus rewards on dining purchases instead of a card that will give you extra cash back, points or miles at the grocery store. The same goes for any other spending category.
To evaluate whether your current credit cards are the best for your spending, go through the last three months of your credit card statements and categorize each purchase — in some cases, your card issuer may do it for you. Then review which cards you have versus the cards that are considered the best in those respective categories to determine whether you’re in good shape or you need to replace a card with a better one for you.
4. Organize Your Wallet
If you use multiple credit cards, you’ll want to always make sure you’re using the best card for each purchase you make. Depending on how you want to approach it, you may write a note and attach it to each card showing its bonus rewards rates or organize your wallet in some other way. The important thing is that you find the best way to know which card to pull out of your wallet to maximize your rewards.
5. Get a Sign-Up Bonus for Your First Post-Pandemic Trip
The coronavirus pandemic has wreaked havoc on the travel industry, and many people from around the world have decreased their travel significantly or stopped it altogether. While it’s unclear exactly when it’ll be safe to travel again, consider working toward a sign-up bonus with your favorite airline, hotel or general travel rewards program, so you can be ready to save on your first trip once you feel safe to travel.
As an example, the Chase Sapphire Preferred® Card not only awards a large bonus to new cardholders, but it also offers access to the popular Chase Ultimate Rewards program. Chase Ultimate Rewards points are a valuable currency you can use to purchase flights, hotels, cruises, vacation rentals, travel activities and more. Chase offers multiple credit cards that earn Chase points with every dollar you spend. Similarly, Capital One offers several popular travel rewards credit cards including the Capital One®VentureOne® Rewards Credit Card and the Capital One® Venture® Rewards Credit Card.
>>IN-DEPTH: Best Travel Credit Card Sign-Up Bonuses
Take your time to compare several credit cards based on sign-up bonuses, and consider your travel habits and preferences to pick the best card for you.
If you want to take advantage of the benefits credit cards provide without dealing with the costs of interest, it’s important to be intentional and proactive about how you use them. As you consider these resolutions, determine which are the best for you in the upcoming year, so you can save money, get rewarded and enjoy valuable perks you may not be able to get anywhere else.
While we work hard on our research, we do not always provide a complete listing of all available offers from credit-card companies and banks. And because offers can change, we cannot guarantee that our information will always be up to date, so we encourage you to verify all the terms and conditions of any financial product before you apply.