Credit cards often get a bad rap, but if used wisely, they can be excellent financial tools. In 2020, make better managing your credit one of your top New Year’s resolutions. Here are five simple credit card resolutions you can use to better your finances.
1. Make the minimum payments each and every month
When it comes to your credit score, your payment history is the single biggest factor affecting your score. In fact, it accounts for 35 percent of your total score.
Missing just one payment can significantly damage your credit. According to Equifax — one of the three major credit bureaus — a single 30-day delinquency could cause your score to drop by as many as 110 points, even if you never missed a payment before.
It’s essential that you pay at least the minimum required each of your credit cards every month, even if you’re dealing with debt. If possible, try to pay more than the minimum to cut down on interest charges, and work toward paying off your statement balance in full each month.
2. Review your card use each year
If you have signed up for credit cards to take advantage of special offers and welcome bonuses in the past, you may end up with a few credit cards you no longer use. While that’s not a big deal, you could be wasting money if any of them have annual fees.
Some cards have hefty fees, ranging from $90 to $550 each year. You’re responsible for paying the fee even if you don’t use the card or its benefits.
In 2020, review all of your credit card statements. If there are any cards that you don’t typically use, but that charge an annual fee, consider closing that account to save money each year — just close them with care (see below).
3. Complete a balance transfer if you have debt
If you have credit card debt, high interest rates can cause your card balance to grow over time. It can take you years to pay off your debt, and you’ll likely pay hundreds or even thousands more than you initially charged.
A smart way to save money and pay off your debt faster is to complete a balance transfer. With this strategy, you move your balance onto a new card that offers a lower APR. Several cards are available that offer introductory 0% APR for a period of time, allowing you to pay off your balance without worrying about interest charges.
For example, the Capital One® SavorOne® Cash Rewards Credit Card offers 0% APR for 15 months from account opening. After that, your APR will be 15.74% to 25.74% (Variable), depending on your creditworthiness. Plus, the card has no annual fee, and you’ll earn 3% cash back on dining and entertainment, 2% cash back at grocery stores, and 1% cash back on all other purchases.
4. Look for a card with competitive rewards
If you’re paying for purchases with cash or a debit card rather than a rewards credit card, you’re basically leaving free money on the table. There are many cards on the market that have no annual fee, but that still offer valuable rewards.
You could earn points, miles, or cash back on your routine purchases, such as gas, groceries, dining out, and entertainment. Over the course of a year, you could earn the equivalent of hundreds of dollars, putting more money back in your wallet.
Look for a card that matches your spending habits. If you’re looking for a general rewards card, consider the Capital One® Quicksilver® Cash Rewards Credit Card. You’ll earn unlimited 1.5% cash back on every purchase you make.
If you’re a frequent traveler, you may want to sign up for the Southwest Rapid Rewards® Priority Credit Card. You’ll earn 2 points for every $1 spent on Southwest® purchases and Rapid Rewards® hotel and car rental partner purchases. And, you’ll earn 1 point per $1 spent on all other purchases.
5. Close accounts with care
If you’re trying to take charge of your credit card debt, you might be thinking about closing your accounts so you can’t use them and run up a balance. However, you should think twice about doing that.
Closing your accounts --especially if you close several at once — can cause your credit score to drop. With less available credit, your credit utilization will increase. Your credit utilization accounts for 30 percent of your score, so when that changes, you can see a significant change in your credit score. Closing your oldest credit card can cause your score to drop even more, as it affects the length of your credit history.
If you have credit cards that don’t have an annual fee, you don’t have to close them. Instead, consider literally freezing them in water in your freezer, or cut them up. That way, you can’t use your cards, but they remain open on your credit report.
Editorial Disclaimer: Information in these articles is brought to you by CreditSoup. Banks, issuers, and credit card companies mentioned in the articles do not endorse or guarantee, and are not responsible for, the contents of the articles. The information is accurate to the best of our knowledge when posted; however, all credit card information is presented without warranty. Please check the issuer’s website for the most current information.