5 resolutions for reducing credit card debt in 2011
January 03, 2011
Paying off credit card debt tops the list of workers' financial resolutions for 2011, according to a recent poll by Principal Financial Group.
When asked about 2011 financial resolutions in a survey for the Principal Financial Well-Being Index, 35 percent of workers said they wanted to pay off credit card debt, a higher percentage than for any other financial goal.
If paying down credit card debt is among your goals for the New Year, consider these five other resolutions to help make it happen.
1. Charge within your means.
Charging many of your purchases is okay and can even pay off in cash back and other rewards. But the strategy works only when the expenditures are in your monthly budget and don't lead to bigger balances carried month to month. Leave your credit cards at home when you shop if they tempt you to make impulse purchases or spend more on necessities than you planned. If you need to carry a balance for a big purchase, set a timeline for when you'll pay it off, and stick to a payment schedule.
2. Track your credit card accounts online
Check your credit card accounts online once a week to keep track of how much you're spending, and sign up for transaction alert services to let you know when your balances reach a certain level. A quick glance at a surprisingly high balance mid-month can serve as a reminder to rein in spending before it's too late. Close tracking and transaction alerts also help catch mistakes or fraudulent purchases. Contact your credit card company immediately if you spot any purchases you didn't make.
3. Don't fall for every pre-approved offer.
Direct-mail credit card offers are on the rebound. In the second half of 2010, credit card issuers sent 640.3 million credit card offers, an 83 percent increase over the 349.1 million offers mailed during the same period in 2009, according to the Synovate Mail Monitor, a direct-mail tracking service.
Do your homework and compare credit card offers of 2012 online before you sign up for preapproved offers that land in your mailbox. Look beyond the credit card promotional offers and the read the fine print detailing interest rates and fees once the introductory periods are over. If you're thinking about transferring a balance, check the balance-transfer fee, usually a few percentage points of the transferred amount. Are the projected savings in interest worth the fee?
4. Pay your credit card bills on time.
Paying your credit card bills late delivers three painful strikes. You rack up late fees. Your credit score suffers. And, if you're more than 60 days late, you get hit with a penalty interest rate hike. Paying your bills on time is the best way to maintain good credit.
5. Keep balances well below credit limits.
A big factor in your credit score is how much of your available credit you use. Financial experts advise keeping your credit card balances below 30 percent of your credit limits. Set that as your first target if your balances are above the 30 percent threshold.