How to Better Manage Your Credit Card Spending in 2017
It’s no secret that many Americans struggle with credit card debt. The average indebted household carries approximately $16,000 on their cards. This is undoubtedly one of the reasons why “spend less, save more” is frequently one of the most popular New Year’s resolutions – right up there with exercising and staying fit.
If you want to shed excess card debt in 2017, and get your spending under control, here are some of the best credit-card strategies and tools to help you achieve that.
Set Up Account Alerts
Often, we overspend simply because we’ve lost track of how much debt we’ve accumulated. A remedy is to set up account alerts to serve as ongoing reminders of what you’ve spent. If your card issuer allows for it--some do, some don’t--set up your account so that you receive an alert whenever your balance reaches certain thresholds; send the notifications go directly to your cell phone or email – whichever you are likely to check often.
A good rule of thumb is to be alerted when you spent 25%, 50% and 75% respectively of your available credit limit. If you’re 10 days into a billing cycle and have already used 75% of your credit line, it’s a signal that you should holster the plastic and examine your bill to determine what more, if any, you can afford to spend for the rest of the month.
Scrutinize Your Monthly Statement
This step has the same rationale as setting up account alerts. Namely, it’s all too easy to overspend in future if you don’t have a good handle of what you’ve spent in the past, and on what purchases. When your monthly credit card bill arrives, don’t leave it untouched in its envelope or your inbox. Open it and have a look. There’s usually no need for fancy spreadsheets or complex analysis. Simply look through the purchases you made in the last month and note any transactions that, in hindsight, elicit surprise or regret.
Avoid Addiction To Rewards
Using the right cash back credit card can put as much as 10% of what you spent back in your wallet, once all the rewards are redeemed.
However, be wary of letting the lure of those rewards lead you into overspending. Just because you get 10% in cash back, doesn’t mean you can afford to spend 10% more than you normally would, or can afford, in order to reap that reward.
Why the caution? For one, credit card reward programs can sometimes be devalued, especially with cards in which you earn points. Many banks include a provision in the cardmember agreement allowing them to change the value of the points you earn. Therefore, in theory, if 10,000 points is worth $100 one day, it could be worth just $50 the next--and it’d be a bad move to make financial decisions off the assumption that you’ll receive that full $100.Treat rewards as a gift, rather than a hard-and-fast discount on your purchases.
Pay Your Card Multiple Times Throughout The Month
If your card spending is causing distress month after month, it may be time to change your payment arrangements in a way that forces you to pay greater attention to it.
Avoid setting your account to up auto-pay, for starters. While that does risk a missed payment, and a credit charge, if you aren’t vigilant, it also mitigates against complacency; if money is automatically drawn from your account every month to pay your card, you have less reason to even look at your bill.
Another tactic is to take advantage of the fact you needn’t to you know wait until the due date to pay your credit card bill every month. You can log into your card’s online interface and make payments throughout the month. This, too, encourages you to actually engage your bill, and what it says about your spending.
Even more powerfully, the multiple monthly payments provide frequent reminders that can help reinforce the financial impact of your purchases you made sink in. In a sense, such a payment scheme turns your credit card into something like a debit card. And a key reason people don’t as often overspend with a debit cards is because those are directly tied to available funds. Seeing your savings decline with every purchase can be a powerful motivator to spend less.
Also, accelerated payments can yield tangible benefits for your credit score. Paying down your bill will lower your credit utilization, which is an important factor in many popular credit-scoring models. The lower your utilization, the better it is for your credit score.
The article How to Better Manage Your Credit Card Spending in 2017 originally appeared on ValuePenguin.
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