A good credit card strategy is key to achieving realistic financial resolutions in the New Year. These three steps will help you earn more rewards, pay less in interest and stop making unnecessary purchases
With January getting underway, it’s a great time to set some money goals for the year ahead. The key is sticking with realistic financial resolutions that you can actually achieve.
“Typical money-related New Year’s resolutions fail because people are too optimistic but put in less work,” says Chayim Kessler, a certified public account and managing member at MiamiBeachCPA. “January is when they’re excited to save, pay down their debts or decide not to use their credit, but then the enthusiasm wears down.”
If you’re ready to make some lasting financial changes in the New Year, these tips can help.
Resolution #1: Keep the right credit cards in your walletThe start of a new year is a great time to conduct a credit card terms and benefits checkup.
“It’s a good idea to compare your card with other competitors on a yearly basis,” says Chris Terschluse, head of marketing and content at Chime. “Perks and fees are always changing, so there may be better options available.”
Reviewing his credit cards is one of Kessler’s resolutions for the new year. His plan is to keep older cards that are bolstering his credit history while weeding out ones with limited rewards, high annual fees and poor customer support.
If you’re making this resolution, look at each card you’re currently using and ask these questions:
- How often do you use it and what do you charge most often?
- How rewarding is the card? And how useful are the rewards you’re earning?
- What’s the annual fee and how does that stack up against rewards or other perks?
- What’s your current APR for purchases and balance transfers?
- Does the card offer any particularly enticing features or benefits?
- Has the card added or removed any benefits in the last year?
Thinking along these lines can help you determine which cards are keepers and which ones no longer make the cut.
See related: 6 worst ways to redeem your credit card rewards
Resolution #2: Pay attention to your card statement
For Nadia Malik, founder of personal finance blog Speaking of Cents, one of the most powerful financial habits to develop is reviewing credit card statements regularly.
“If the resolution for the upcoming year is to spend less, credit card statements need to be read at least once a month,” says Malik.
There are three benefits of checking your card statements when you’re set on making better financial resolutions:
- Maximizing rewards. Knowing your typical spending patterns can help you get the most from your card. For example, you can better match up purchases throughout the year based on your card’s quarterly bonus calendar. Or you might find that a new rewards card might be what you need to rack up cash back, miles or points.
- Minimize interest charges and fees. Paying interest or a steep annual fee can eat away at the value of rewards you’re earning. It’s important to check your statements to see how much you’re handing over in interest by carrying a balance, says Malik. Seeing hard numbers can be a motivator to find a card with a lower rate.
- Protect your credit. If one of your New Year’s financial resolutions is to boost your credit score, checking your statement is a must. Reviewing your card statement can clue you in to potentially fraudulent charges or billing errors that could hurt your score.
Resolution #3: Stop paying credit card interest
Credit card interest can drain away the value of rewards you’re earning, but there’s a simple financial resolution you can make in the new year: Pay in full.
“Rewards cards typically have higher interest rates than other cards, but those rates matter a lot less when you pay off the balance each month,” says Rob Berger, deputy editor of Forbes Money Advisor and author of “Retire Before Mom and Dad.” “This is a great way to reap the blessings of the rewards and keep those interest payments low.”
Paying in full assumes you’re tracking your expenses as part of your financial resolutions to avoid overspending. Malik says it can make sense to switch to spending with your debit card or cash if you’re not consistent with paying your card balance off each month.
The downside here is that you might be missing out on valuable rewards. The better option may be leveraging your rewards to help pay down your balance each month.
“Rewards credit cards can be put to their best use if they’re balancing out some of your expenses,” says Malik. Cash back rewards earned on grocery purchases, for example, can be applied to those expenses as a statement credit.
If you need to carry a balance because you’re using your card for a larger purchase, resolve to look into the best 0% APR deals in the new year. Here are a few cards to get you started:
- Chase Freedom Unlimited – 0% APR on purchases and balance transfers for the first 15 months. After that, a variable APR of 16.49%-25.24% applies.
- BankAmericard® credit card – 0% APR on purchases and balance transfers made within the first 60 days for 18 billing cycles. Regular APR thereafter is 14.49%-24.49% (variable).
- Blue Cash Everyday® Card from American Express – 0% APR on purchases and balance transfers for the first 15 months. Regular variable APR after that: 12.99%-23.99%.
See related: Best balance transfer credit cards
How to stick to your financial resolutions in the new year
You might want to start your year off with a bang by setting some huge financial goals, but that’s a potential stumbling block, says Berger. “Not only are they often too broad, but they also might not even be achievable as quickly as you’d think.”
The better approach, he says, is to go small using these strategies:
- Create mini-goals. Instead of pursuing one big goal, break it down. “Three goals a day that each take an hour can move toward the targets you’re aiming to make,” says Berger. “Seeing daily progress is encouraging, increasing the likelihood of success in the long run.”
- Prioritize your goals. Sometimes financial goals can compete. For example, you may be trying to save $5,000 in your emergency fund and pay down $5,000 in debt. If your budget won’t allow you to do both, then focus first on the goal you most want to accomplish.
- Choose actionable goals. Specificity is the name of the game for creating realistic money resolutions. For example, if you want to save $1,000 in January, one of your action steps might be trying a spending freeze or using the cash back rewards you earned from holiday shopping to fund your savings account.
Kessler says planning out credit card spending weekly can help you keep track of your expenses and adjust as needed to stay in line with your budget. He also recommends creating a visual reminder of your goals or resolutions to track your progress.
That can help you stay motivated when keeping your resolutions gets tough, which it inevitably will, says Malik. “There’s always a time when you can feel burned out and discouraged, but as soon as you pick yourself up, the faster success will come to you.”
Last but not least, don’t assume you need to tackle all your financial resolutions at once.
“Building a proper financial plan takes serious time and consideration,” says Terschluse.
Changing your habits slowly can help you ease into new routines with your credit cards and finances overall. Rushing into them headlong, on the other hand, can result in you becoming disorganized or overwhelmed, which won’t help you reach your goals.
“If you feel like you have control over the resolutions you set, you’re more likely to follow through with them,” he says.