A 3 Step Plan for a Credit Card Spring Cleaning
I distinctly remember the thrill of opening my first credit card. At a department store, where I was spending more money than I probably should have been, the sales associate at the cash register offered me the opportunity to open a store card extolling the benefits of using their card– including a 20% discount on my purchase that day. I signed up immediately. It didn’t take long to regret the decision. I’ve never been one to act so impulsively when it came to my personal finances and couldn’t believe how easily I took the bait.
Let’s be honest, I am not alone. Credit card companies make it incredibly appealing to sign up by offering a slew of travel benefits, cash back, and bonus points within the first few months of opening a card. Then you are encouraged to continue to spend with promotions during specific months at certain retailers or industries. Some of these benefits are great, and people make a living off of acquiring points and cashing in on them. But in this game, there’s something to remember: it takes a lot of time managing, tracking, and spending these points. Card issuers don’t make it easy, and these “free” benefits are rarely free. Whether you’re paying through annual fees or interest, the funding for these benefits comes from somewhere.
It’s good practice to review your personal finances and spending habits every few months. As a part of that, always review your credit cards. While, there’s definitely a time and a place for credit cards, make sure you’re using them wisely. Here are the top things I look for when conducting my annual credit card spring cleaning:
Recurring charges: We’ve all signed up for long forgotten subscriptions or those which have increased in price without you realizing it. It’s important to audit your subscriptions and make sure you’re actually using them and not just throwing away money. Review your last 12 months of credit card statements and really scrutinize your recurring subscriptions.
Weigh the costs and benefits of each card: This is particularly important for high fee cards. Audit what you’re spending on the card versus how you’re utilizing the points. You’ll be surprised by how aspirational the rewards can be as opposed to how you’re actually using them. If you’re not making full use of the rewards, consider calling the company and asking to downgrade to a no fee or lower fee card. It’s not a good idea to cancel outright, as that can impact your credit score due to an increase in credit utilization.
Do a deep dive into your credit score: Almost every card out there today offers a complementary credit score service but the calculation into these is not uniform across the industry. If your credit score has improved over the last year, you might even be eligible for a better offer. It’s always a good idea to call your company and ask if that’s the case. Don’t understand how credit scores work? Read up on our blog post here.
If all this seems a little scary and a lot of work, please reach out to our family office division. We can help you make sense of your credit cards, reduce debt, and set your family up for success.
Danielle Holden
Family Office Advisor