Like most people, we rely on our household credit cards more and more all the time. Also at times, it has become difficult to manage the payments and stay on top of the interest levels – and basically use them as effectively as possible. This thought has got me thinking that maybe this is a sign that we should consider changing to another credit card. If this is the case for you too, and you want to think about making an adjustment and re-evaluating your credit card before 2015 – here are some considerations you will need to make before you arrive at the best option for your financial future.
Here are some important credit card do’s and don’ts that can help guide us all as we search for a potential new credit card. Hopefully these triggers can help you decide if this is a necessary step and ultimately can help you ‘step-up’ your financial management skills as the upcoming new year fast approaches.
CREDIT CARD DO’S . . .
1) Select a credit card based on your credit situation: This is an important step in this process, as the shape your credit score/history is in will determine which credit cards you are more likely to be approved for. For example, if you have a poor credit rating, this will limit the variety of cards that lenders will offer you. Typically, if your credit is poor, then lenders may more commonly approve you for a Secured credit card, as these cards often have lower credit limits and can help you get your credit back on track without the option of spending beyond your means.
2) Examine credit card reviews: You can read various reviews about certain credit card choices through many online sites and this can help you learn more about which cards have higher favourably among other borrowers, many of who are in similar financial situations as you. Some of the characteristics that are comparable on these sites include, the credit card rewards, the interest rates, as well as some of the fine print details about guidelines and restrictions that will play more to your financial needs and strengths.
3) Select a credit card based on your personal spending and payment habits: This is an important part of the credit card search, as it can mean that you will get the most out of the card, as well as being able to manage the payment plan with more efficiency. For example, if you are interested in a card that will help you earn points towards groceries, travel and other merchandising items, then a rewards card may be the better option for you. However, in order to get the most out of the card, you will need to use it enough to earn enough rewards – and also you will actually plan to use the points for a specific purpose.
In addition to your spending habits, you will also want to reflect on your credit card payment behaviour in order to make sure you are able to maintain proper repayment habits – and not fall behind in your payments. If, for example you notice you have been carry around a balance from month to month, then opting for a credit card with a lower interest rate may be the most suitable. Alternatively, if you are able to pay off your balance each month, then a card such as a rewards card or another card with a higher interest rate could also be an option for you.
CREDIT CARD DON’TS . . .
1) Apply for the very first credit card you see: Rushing into a credit card plan before doing the research and taking into account some of the above mentioned steps, can lead you to choose a less fitting card. In some cases, you may apply for a card that does not reflect your financial needs and your repayment abilities. Therefore, it is important to make sure you read all of the card features and make sure they are best suited to you Choosing a less suitable card can also have negative implications for your finances, if you choose a card that you are not able to manage. This can lead to missed payments and high credit card balances – and ultimately to a low credit score.
2) Apply for more that one credit card at the same time: This over-eager behaviour can sometimes lead lenders to assume you are very anxious and even desperate to get a credit card. As a result, some lenders may think you are not as financially responsible as you should be. Subsequently, lenders may also offer you a card that is inappropriate, because they know you will accept any terms that you are offered. Either way, it is best to apply for one card at a time – and even space out the time you take to apply for multiple credit cards to not appear too financially impulsive. Also it’s never a good idea to get too many credit cards as that can cause you to overspend.
3) Cancel all of your other credit cards: This pointer also makes this ‘do not’ list because you may also be acting too quickly. Perhaps establishing your new credit card and then closing out your old ones is a better plan – just in case this new ‘wonder’ card does not work out in your favour. Additionally, hastily closing your credit cards can also flag your account for creditors and they may view you as being unable to handle managing more credit. Once again, taking your time and thinking through your credit card plan is always the best method of making sure you a) choose the right card and b) do not make a credit card adjustment that will leave you worse off than before.
As you can see, and as I have quickly realized – there are SO many decisions that need to be made before you obtain a new credit card. That being said, this can be a good opportunity to improve your finances and start 2015 off on a better note. If you are unsure of how you can more effectively position your finances moving forward, do some research and ask for some additional financial advice – so that you can make the most informed decision for yourself and for your bank account.