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4 Steps to Optimize Your Credit Card Portfolio

4 Steps to Optimize Your Credit Card Portfolio

Credit cards are easy enough to get. But just because you can get one, doesn’t mean you should. Use the wrong credit card, and it could cost you thousands more than you intended. Use the right one, and it could earn you thousands more than you ever imagined.

That’s why, every year you should take a look at the cards in your wallet, and re-calibrate your “portfolio”. Get rid of the cards that aren’t performing and replace them with cards that better match your spending or borrowing habits. The impact of doing so could cut your rates by more than half, or earn you a free flight faster than you ever expected.

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To give you an idea of how much you can gain by optimizing your credit card portfolio annually, with the exact same spend, we know of one cash back card that will earn you $456 in cash back EVERY year. Using a sub optimal card, you would only receive $99 cash back. That’s a $357 difference per year.

Alternatively, you could be paying 20% interest on thousands of dollars in credit card debt. Why not get a balance transfer card and pay 0% for the next 12 months? Doing so can save you $1,420 in 1 year of interest payments alone!

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Here are 4 strategies to optimize your credit card portfolio.

1. Determine What Type of Credit Card User You Are

Generally, users fall into one of 3 categories. You either pay off your credit card every month, always maintain a balance, or occasionally maintain a balance. If you pay off the entire balance of your credit card at the end of every month religiously, you’re going to want a rewards card. If you always maintain a balance, or frequently only pay the minimum payment, you’ll want a low interest credit card option. If you’re somewhere in the middle, you may want both!

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2. Compare The Market

Now that you know what type of credit card user you are, scour the market for the best credit cards that match your needs. If you pay down your balance every month, just look at rewards credit cards. Interest rates will have no impact on you. Look for sizable welcome bonuses, annual fee waivers (so you can try before you buy), and rewards programs that suite your preferences (cash-back, rewards, miles, retailer). Find a card that maximizes your rewards given your spending habits.

If you maintain a balance, get a low interest credit card. There are two considerations here. If you already have a credit card balance, look for a balance transfer card with a 0% rate for the longest promotional period possible and the lowest balance transfer fee possible. Don’t get fooled by a low rate, with a high transfer fee in the small print.

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If you know you’re going to carry a balance in the future, look at one of the many low interest credit cards for new purchases. You’ll want to look for a low rate credit card that has no annual fee and a low fixed interest rate that won’t fluctuate over time. Don’t get fooled by promo rates. Get a credit card you can keep in your wallet over the course of the year for any purchases you know you’re not going to be able to pay down right away.

3. Add New Credit Cards

Now that you’ve done your research, apply for the cards that optimize your credit card usage. Don’t apply for 5 cards at once, you’ll blow your credit score. Depending on your current credit score, adding a credit card every few months will be just fine. There’s no limit to how many credit cards you can have. There’s only a limit to how many you can apply for in a very short period of time.

4. Purge Your Wallet

Now that you’ve added the credit cards you want, it’s time to get rid of the cards you no longer need. The first priority will be to get rid of any credit cards with an annual fee that aren’t giving you optimal value. Don’t worry about the impact of closing accounts on your credit score. Any minor bump will be temporary, especially if you replaced an existing card with a new one. Regardless, despite what your current credit card company will tell you, it makes no sense to pay $120 a year in annual fees, if you’re not using a credit card and it provides you with no value.

Conclusion

Don’t just do this once and forget about it. You should be adding and purging credit cards from your wallet constantly. There are new credit card offers and products on the market all the time. Credit card issuers tend to give their richest deals to new customers, don’t be afraid to take advantage. Loyalty definitely doesn’t pay.

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Marc Felgar

Marc Felgar is an aging, health & senior care expert focused on improving the lives of mature adults.

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Published on November 20, 2018

The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

The Best Ways to Save Money Even Impulsive Spenders Can Get Behind

The truth is, there are many “money saving guides” online, but most don’t cover the root issue for not saving.

Once I’d discovered a few key factors that allowed me to save 10k in one year, I realized why most articles couldn’t help me. The problem is that even with the right strategies you can still fail to save money. You need to have the right systems in place and the right mindset.

In this guide, I’ll cover the best ways to save money — practical yet powerful steps you can take to start saving more. It won’t be easy but with hard work, I’m confident you’ll be able to save more money–even if you’re an impulsive spender.

Why Your Past Prevents You from Saving Money

Are you constantly thinking about your financial mistakes?

If so, these thoughts are holding you back from saving.

I get it, you wish you could go back in time to avoid your financial downfalls. But dwelling over your past will only rob you from your future. Instead, reflect on your mistakes and ask yourself what lessons you can learn from them.

It wasn’t easy for me to accept that I had accumulated thousands of dollars in credit card debt. Once I did, I started heading in the right direction. Embrace your past failures and use them as an opportunity to set new financial goals.

For example, after accepting that you’re thousands of dollars in debt create a plan to be debt free in a year or two. This way when you’ll be at peace even when you get negative thoughts about your finances. Now you can focus more time on saving and less on your past financial mistakes.

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How to Effortlessly Track Your Spending

Stop manually tracking your spending.

Leverage powerful analytic tools such as Personal Capital and these money management apps to do the work for you. This tool has worked for me and has kept me motivated to why I’m saving in the first place. Once you login to your Personal Capital dashboard, you’re able to view your net worth.

When I’d first signed up with Personal Capital, I had a negative net worth, but this motivated me to save more. With this tool, you can also view your spending patterns, expenses, and how much money you’re saving.

Use your net worth as your north star to saving more. Whenever you experience financial setbacks, view how far you’ve come along. Saving money is only half the battle, being consistent is the other half.

The Truth on Why You Keep Failing

Saving money isn’t sexy. If it was, wouldn’t everyone be doing it?

Some people are natural savers, but most are impulsive spenders. Instead of denying that you’re an impulsive spender, embrace it.

Don’t try to save 60 to 70% of your income if this means you’ll live a miserable life. Saving money isn’t a race but a marathon. You’re saving for retirement and for large purchases.

If you’re currently having a hard time saving, start spending more money on nice things. This may sound counterintuitive but hear me out. Wouldn’t it be better to save $200 each month for 12 months instead of $500 for 3 months?

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Most people run into trouble because they create budgets that set them up for failure. This system won’t work for those who are frugal, but chances are they don’t need help saving. This system is for those who can’t save money and need to be rewarded for their hard work.

Only because you’re buying nice things doesn’t mean that you’ll save less. Here are some rules you should have in place:

  1. Save more than 50% of your available money (after expenses)
  2. Only buy nice things after saving
  3. Automate your savings with automatic bank transfers

These are the same rules that helped me save thousands each year while buying the latest iPhone. Focus only on items that are important to you. Remember, you can afford anything but not everything.

How to Foolproof Yourself out of Debt

Personal finance is a game. On one end, you’re earning money; and on the to other, you’re saving. But what ends up counting in the end isn’t how much you earn but how much you save. Research shows that about 60% of Americans spend more than they save.[1]

So how can you separate yourself from the 60%?

By not accumulating more debt. This way you’ll have more money to save and avoid having more financial obligations. A great way to stop accumulating debt is using cash to pay for all your transactions.

This will be challenging, depending on how reliant you are with your credit card, but it’s worth the effort. Not only will you stop accruing debt, but you’ll also be more conscious with what you buy.

For example, you’ll think twice about purchasing a new $200 headphone despite having the cash to buy them. According to a poll conducted by The CreditCards.com, 5 out of 6 Americans are impulsive spenders.[2]

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Telling yourself that you’ll have the discipline to not buy things won’t cut it. This is equal to having junk food in your fridge while trying to eat healthy–it’s only a matter of time before you slip. By using cash to make your purchases, you’ll spend less and save more.

A Proven Formula to Skyrocket Your Savings

Having proven systems in place to help you save more is important, but they’re not the best way to save money.

You can search for dozens of ways to save money, but there’ll always be a limit. Instead of spending the majority of your effort saving, look for ways to increase your income. The truth is that once you have the right systems in place, saving is easy.

What’s challenging is earning more money. There are many routes you can take to achieve this. For example, you can work long and hard at your current job to earn a raise. But there’s one problem–you’re depending on someone else to give you a raise.

Your company will have to have the budget, and you’ll have to know how to toot your own horn to get this raise. This isn’t to say that earning a raise is impossible, but things are better when you’re in control right? That’s why building a side-hustle is the best way to increase your income.

Think of your side-hustle as a part-time job doing something you enjoy. You can sell items on eBay for a profit, or design websites for small businesses. Building a side-hustle will be on the hardest things you’ll do, be too stubborn to quit.

During the early stages, you won’t be making money and that’s okay. Since you already have a source of income, you won’t be dependent on your side-hustle to pay for your expenses. Depending on how much time you invest in your side-hustle, it can one day replace your current income.

Whatever route you take, focus more on earning and save as much as possible. You have more control than you give yourself credit for.

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Transform Yourself into a Saving Money Machine

Saving money isn’t complicated but it’s one of the hardest things you’ll do.

By learning from your mistakes and rewarding yourself after saving you’ll save more. What would you do with an extra $200 or $500 each month? To some, this is life-changing money that can improve the quality of their lives.

The truth is saving money is an art. Save too much and you’ll quit, but save too little and you’ll pay for the consequences in the future. Saving money takes effort and having the right systems in place.

Imagine if you’d started saving an extra $100 this next month? Or, saved $20K in one year? Although it’s hard to imagine, this can be your reality if you follow the principles covered in this guide.

Take a moment to brainstorm which goals you’d be able to reach if you had extra money each month. Use these goals as motivation to help you stay on track on your journey to saving more. If I was able to save thousands of dollars with little guidance, imagine what you’ll be able to do.

What are you waiting for? Go and start saving money, the sky is your limit.

Featured photo credit: rawpixel via unsplash.com

Reference

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