3 Credit Card New Year’s ResolutionsPosted January 7, 2016 - updated April 27, 2016 in Credit Card Tips, Personal Finance
Can you believe it’s the New Year? It seems like 2015 went by in the blink of an eye. With the New Year upon us, we thought it would be the perfect time for New Year’s Resolutions. Next to hitting the gym more often and spending quality time with family and friends, getting out of debt is a popular resolution.
Setting a goal is only half the battle; reaching it is another story. You may feel motivated to get in shape on January 1st and sign up for a gym membership right away, but by the time February rolls around you’ve already thrown in the towel. It’s important to set achievable goals and make an action plan to accomplish them. Here are three credit card and debt goals to aim for in 2016.
1. Don’t Carry a Balance on Your Credit Card
Credit cards are a powerful financial tool when used in a smart way. Maximizing your reward points and managing your cash flow are two good uses of credit cards; carrying a balance, not so much. Not only can carrying high balances on your credit card lower your credit score, it can also cost you a boatload of interest. Before you charge anything on your credit card, ask yourself this all-important question: can I afford to pay it off in full by the time my credit card statement comes due? If the answer is no, you shouldn’t be charging it on your credit card.
2. Do Pay More Than Your Minimum Payment
If for some reason you’re carrying a balance on your credit card, do pay more than the minimum. The minimum is typically the greater of 2 per cent of your balance or $20. If you only pay the minimum, it can take you years to pay off your balance and cost you thousands in interest. Take the time to create a budget and see where you can cut back on spending. Show some financial discipline and cut out frills like lattes and lunches until your debt is under control.
3. Pay Down Consumer Debt
Interest rates may be low now, but they probably won’t stay this low forever. Instead of taking on more debt, use this as an opportunity to pay down debt. Two popular ways that make debt repayment easier are the debt-snowball method and debt stacking method. With the debt-snowball method, start paying down the debt with the smallest balance (while paying the minimum on your other debt). A lot of people find this method motivating since you pay off one debt at a time.
A second method you can use is the debt stacking method. With this method, start by paying off the consumer debt with the highest interest rate. This method makes sense if you have debt with high interest rates like credit card debt or payday loans.