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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 January 8, 2021

How To Pay Off Credit Card Debt Fast: 7 Powerful Tips

How To Pay Off Credit Card Debt Fast: 7 Powerful Tips

Ever wondered whether your credit card debt is the reason you’re in a bad financial situation? You can’t enjoy any fun activities because a good chunk of your money goes toward debt payment. Heck, you’re even behind on some of your monthly bills.

The effects of clumsy debt management are too many to list here. This guide is going to help you discover how to pay off credit card debt fast and start chasing your financial goals.

Debt problems are the last thing anyone wants to encounter. But things can get out of hand when all the “little debts” you take accumulate in interests.

What if you knew some simple and proven ways to be debt-free quickly? Implementing them would mean better financial health for you. It becomes possible to free up cash for your “wants.” These include taking a trip or buying something you’ve always desired. All that while paying your bills on time!

Let’s not wait any longer. Here are 7 powerful tips for paying off credit card debt fast:

1. Pay More Than the Minimum Credit Card Payments

Many people only pay the monthly minimum on their credit cards. Truly, that’s the right amount for staying on good terms with your credit card company. But you need a different approach if you’re looking to achieve financial independence within a short time.[1]

Most of your payments go toward interest costs when you only pay the minimum amount. A substantial sum of your balance remains standing. As a result, it becomes more expensive to eliminate your debts.

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You don’t want to wait more than 10 years to get rid of debt while it’s possible to do it sooner. All you have to do is double that $100 minimum payment to $200 or go higher.

The good thing is that minimum credit card payments are affordable in most cases. By paying a higher amount, you reduce your interest costs, lessen your borrowing period, and boost your credit score.

2. Start With High-Interest Credit Card Debt

If you have more than one credit card debt, prioritize putting the extra money toward the ones with the highest interests. This debt pay-off strategy, known as the debt avalanche method, is essential for being debt-free quickly.[2]

First, you need to list down all the credit card debts you have in the order of their interest rates. Next, you choose the one with the highest interest and pay a significant amount toward it each month. It can be an amount twice or even thrice larger than the minimum payment.

At the same time, you make monthly minimum payments on the other debts. Their interest charges won’t be as costly as that of the first debt on your list. You only move on to the next high-interest debt after the first one is gone. Remember that your focus is on the interest rates and not the balances.

3. Revisit Your Budget

Budgeting is useful for tracking your financial moves. Once you create a budget, some tweaks along the way can make it work for you better. One situation that requires you to revisit your budget is when you’re struggling with debts. It might hurt a bit to slash some expenses. But you also don’t want to miss out on achieving financial freedom in the long run.

You can reduce some variable expenses to free up more cash for credit card debt payments. They’re the ones that change from time to time. Some examples are groceries, fuel, and clothing.

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Other opportunities for cutting down your spending lie in non-essential expenses. Instead of dining out all the time, you can cook at home more to save money. You can also share some subscriptions with friends and pay a fraction of the cost.

If you’re determined enough, you can eliminate all your unnecessary expenses and focus on paying off your credit card debt first.

4. Avoid Using Your Credit Cards

Do you want to know how to pay off credit card debt with a low income? One simple way is to stop using them. Having your credit cards everywhere you go means that you’ll be more tempted to buy unnecessary stuff. In this case, you spend money that you don’t really own and get deeper into debt.

The quickest fix to stop the debt build-up is spending with cash. You’ll be more aware of everything you can afford at any particular time. If you decide to keep one or two cards to ease the transition, always make wise choices. For instance, only use them when experiencing financial difficulties.

It’s best to categorize your fun activities under “discretionary spending” in your budget. This way, you won’t need more debt to kill your boredom. By halting your credit debt from accumulating, it’s easy to pay down what you already owe and be happy with the progress.

5. Start a Side Hustle to Boost Your Income

You’re probably turning away a lot of money by not monetizing your skills. Everyone has something that they’re good at doing. And you can use that to generate extra income for attacking your credit card debt.

If you look around your neighborhood, you can find several side hustle opportunities. It can be pet sitting, tutoring, or lawn mowing. You can start an online business by offering services such as digital marketing, content creation, and web development. Such skills go in high demand on freelance sites and job boards.

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Finding clients on social media is also a good strategy to utilize your skills and make more money. Facebook groups, Quora Spaces, and subreddits are some places to look for side jobs. You only have to join a niche-specific platform, share your services, and respond to any opportunities.

It’s possible to learn a skill, practice it, and earn from it. Use the free resources online or purchase some e-courses to get started.

6. Sell Your Used Items for Extra Cash

Starting a side hustle isn’t the only way to generate extra money. You can turn unwanted items into cash for paying off credit card debt. Whether it’s an old TV, book, or furniture, there is always someone itching to buy your used stuff.

A garage sale, as much as it’s old-fashioned, is perfect for getting your neighbors and passers-by to buy from you. You keep all the money because there are no business permits or taxes involved. While you may not make much cash, it’s better than leaving your stuff to go defunct in your storage.

Other than that, you can sell your used stuff on online marketplaces. Facebook groups are great places to start if you want quick approvals and hence sales. You only have to ensure that your listing follows Facebook’s commerce policies.

When selling any pre-owned items online, ensure they’re in good shape to avoid problems with your buyers.

7. Know When to Seek Help With Your Debt

Asking for help with your credit card debt can be challenging to do. But letting it drown you is a road you don’t want to take. While you may feel embarrassed at first, it’s the best way to get back on track when you run out of options.

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There are tons of non-profit credit counseling organizations that can offer you free guidance on how to escape the debt trap. An example is The National Foundation for Credit Counseling. They simply review your finances and help you determine the source of your financial problems. After that, they match you with an actionable debt management solution.[3]

In extreme cases, the debt solution can be:

  • Debt relief – where your debt is partially or wholly forgiven
  • Debt consolidation – taking out one loan to repay others
  • Debt settlement – the creditor forgives a significant portion of your debt
  • Bankruptcy – legal process for seeking relief from some or all your debts

It’s necessary to carefully weigh your options before deciding on the way to go. Find out how it might affect your credit score and any other risks.

Wrapping It Up

Debt is a major setback when you’re trying to prosper in life. Paying off credit card debt is essential if you want to reach your financial goals. That means having more free income, a good credit card score, and even a chance to retire early. You become more productive each day because of the peace in your mind.

So, you now have some tips on how to pay off credit fast. Go ahead and get rid of that good life progress killer!

More Tips on How to Pay Off Debt

Featured photo credit: rupixen.com via unsplash.com

Reference

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