Have you begun digging around for all those gas receipts, donation tickets and other paperwork in order to make the most of your tax filing for the year? Odds are, you’ve run into a few credit card receipts and wondered what you were thinking to have bought this or that. Those realities can serve as a springboard into better spending habits as you gear up for the new year. And, like all lessons learned, all it takes is a look back at your past questionable financial decisions.
As you’re looking through your credit card statements, have you noticed any patterns? Maybe you paid only the minimum amount due several months? We all know that’s not going to get your credit card debt much lower; at best, you’re treading water. One way to kickstart better habits is to set up automatic payments that are deducted right out of your bank account. If your minimum payment each month hovers around, say, $50, make up your mind that the least you’ll pay is $75 (or more if you can afford it) and then set it up to be paid well before the due date. Try to then make at least one more payment each month. Even if it’s another $50, you’re well on your way to seeing those balances drop. And honestly, once you make up your mind to approach your debt from a more proactive position, those bigger payments become easier to make.
Set up an Excel spreadsheet. It’s going to be time consuming initially, but once it’s set up, maintaining it is a lot easier. Not sure how to insert formulas? There are tons of tutorials online or ask the neighborhood kid who just happens to be a computer expert to help. Set up a column that keeps a running balance on how much you’ve paid on each credit card and have it deduct from a set amount you want to have paid down within the year. Seeing those goals get closer can be a powerful incentive. Not only that, but it will also serve as a reminder to think before you charge anything. That’s not to say you don’t want to use your credit cards, but you do want to go into the new year a bit wiser, yes?
Did you know you can sometimes negotiate a lower interest rate on your credit cards? A lot will depend on how well you’ve managed your account up to that point, but if you’ve managed on time payments, not gone over your credit limit and are too close to that limit, there’s a good chance your credit card network will knock a quarter or half percentage point off of your APR. Also, you might consider asking your card company to waive the annual fee, too. Some will and some won’t, but it can’t hurt to ask. If the annual fee is excessive, and if your credit can take the hit, you might consider opening a balance transfer account that doesn’t have an annual fee, but that will allow you to move your balances over interest free.
Credit Card Rewards
We’re always surprised at how many consumers don’t use their credit card rewards. You can often use them for gift cards, too. Consider donating them. More card companies are allowing their customers to donate their rewards points to worthy causes. Domestic abuse shelters, military organizations – there are no shortage of those who can really make great use of rewards points. Also, keep an eye on those expiration dates (although more and more credit card companies are foregoing expiration dates).
Past credit problems keeping you from gaining control of your finances? Make up your mind that you’re going to use 2013 to get back on track with your financial future. Can’t get approved for a traditional credit card? A secured credit card can be a great way to improve your scores. These credit cards allow lenders to report your habits to the credit bureaus. You have the opportunity to make on time payments, thereby improving your scores. Keep in mind, though, that prepaid debit cards and secured credit cards are very different. Prepaid products are not reported to the bureaus and that will defeat your purpose.
Also, as we go into the new year, it’s an ideal time to take another look at your retirement plan. Are you maximizing your options? If not, consider making those changes, especially if your employer matches your deductions.
As you’re making moves towards better money management, don’t forget your children in your efforts. Are they old enough for a prepaid card? Do they understand the responsibility behind money management? If so, a prepaid card or savings account can be a powerful way to ensure financial literacy.
What are your plans for the new year? Are you planning on reining in your spending? Paying down credit card debt, maybe student loan debt? Tell us what your year looks like in terms of your finances.
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