As each year draws to a close, participation is important financial support. A task that should include, among other things, reviewing the overall spending pattern, your progress savings and retire goals, and don’t forget—review me credit card story.
An annual financial audit can provide a variety of useful information. Perhaps best of all, this exercise helps to find out credit card benefits and compensation can be terminated after a year. But this is only one of the reasons to participate in this work. There are many other financial factors and credit score-consider the benefits associated with performing a thorough annual screening of your credit card.
The importance of doing a year-end review of your credit cards
From one year to the next, your expenses may change, your lifestyle may change and with these changes, may come a change in how you use it. credit account. This may mean you don’t use cards anymore, or maybe you don’t even use the many credit programs that were once important.
If some—or all—of these things are true, a credit card search or annual review can be very helpful.
“We encourage cardholders to regularly review their wallets to make sure the credit cards they carry fit their lifestyle and spending habits,” said Krista Phillips, a vice president. manager and head of credit cards at Wells Fargo.
Many consumers simply don’t use their cards to their full potential, Phillips continues, and that could leave valuables behind. rewards, bonuses, creditsor other benefits associated with the card on the table.
Maybe there is special credit card you haven’t used it in a year and as a result, the issuer may close it—which can affect your credit report (more on that at last). On the other hand, if you are not using a card but you are still paying an annual fee, it may be difficult to justify the continuation of the relationship.
“By taking a step back to review your cards, you can get a clear understanding of whether they’re working for you, how you can use rewards so they don’t expire, and any other opportunities and benefits that may be available.” for sure. you’re getting more value from your card,” Phillips said.
Here’s an in-depth look at some of the important reasons to perform an annual financial audit.
1. Do you meet the requirements to get important points?
Some credit cards provide annual financial statements to customers who participate in certain types of spending throughout the year. Generally, these scores are related to the scope travel related expenses or, special airfare deals. For other cards, there may be credits awarded each year in connection with the advertising purchases you’ve made.
These programs often come with specific spending limits that must be met, as well as deadlines by which you must meet those requirements. This means that the benefit cannot be rolled over to a new year. And if you don’t meet the spending requirements, you’ll miss out on the annual benefit.
By identifying this information through an annual review, you can decide which benefits are most important to you and should be pursued first. deadline is coming. This may mean making additional purchases or participating in additional expenses if necessary to obtain credit.
But there is an important caveat here. Elly Szymanski, assistant vice president of credit card products for Navy Federal Credit Union, warns of unnecessary expenses in pursuing the needs of such programs.
“No matter what the offer is, you shouldn’t keep swiping your card or changing your spending habits just to get rewards,” Szymanksi said. life.”
2. Do any bonuses expire?
Similar to opportunities that expire to receive credit information for certain types of spending, there may be bonuses that expire each year if you do not meet certain spending requirements. This is often true of airline and hotel credit cards that offer bonuses ranging from status upgrades to mileage awards or airfare. In the case of hotel credit cards, the bonus may be free hotel nights.
In addition, many credit cards introduce welcome bonuses when you open an account, and receiving those bonuses usually requires spending a certain amount of money within a set period of time.
Again, by reviewing your account each year, you can find out which of these opportunities you may have overlooked and take action in time to ensure that you receive any bonuses that are important to you. you “If you’re close to spending the money to get that bonus, it might be worth a targeted purchase to help you get there,” Phillips said.
However, the emphasis here is on the word purpose, as opposed to frivolous or unreasonable spending.
3. Do free trials ever end?
In many cases, a new credit card may come with a free trial offer. This may include media services, delivery services, and more. But all good things come to an end and that includes free advertising that your credit card lender has picked up the tab for.
As you conduct your annual credit card review, it’s important to decide if you want to continue with these services on your own and if the cost fits your budget. If the answer is no, you may need to exit the service in question.
4. Do you have unused credit cards?
Reminder to credit card holders everywhere: This is not unusual for credit card issuers. close an account because you have not used the card for a long time. When this happens it can trigger a lower your credit score. This is because a closed account affects the two factors used to calculate the score.
First, a closed credit card can reduce the overall length of your credit history credit report. This is especially problematic if the canceled account is one of your longest-standing credit cards and your remaining accounts were recently opened. The length of your credit history is one way to calculate your credit score.
A credit card can also be closed increase your credit utilization. This is because closing an account reduces your available credit. And the debt-to-debt ratio will be higher bring your score down.
To avoid these things credit score systemyou may want to find a way to spend even a small amount on your regular cards that are not used each year, in order to be proactive.
“Consider putting something as small as your Netflix subscription on a credit card to keep it open,” says Brian Walsh, a financial planner and senior manager of financial planning and SoFi. “And maybe put your HBO Max subscription on another card to unlock it.”
But if you’re going to do it this way, warns Walsh, be sure to set up autopay for each credit card bill and pay the balance in full each month, so you don’t end up with a balance you’ve got. lose your way, and hurt yourself financially in the long run.
5. Did you spend enough money to pay the annual fee?
This is perhaps one of the most important questions to consider when conducting your credit card year-to-date review. Many credit cards charge a fee annual salary in exchange for all those fun things and programs. Paying that fee, however, only makes sense if you’re using those bonuses, benefits, programs, or other rewards year after year. If, as your life progresses, you no longer get value from a card and its offerings, it may be time to cut it short and save yourself some money.
“Know when a credit card with a fee is useful, and when it isn’t,” Szymanski said. “If the annual fee of your card is $100, but you only get $50 and buy it back, the card is not worth your time.”
The good news is that most credit card issuers waive their annual fees the first year you have the account, which gives you a good chance as a smart consumer to track your spending on the card. and figure out how to get the most rewards. .
In cases where you don’t earn and redeem rewards to justify the continued use of the card and its annual fee, experts often recommend switching to a no-fee card or looking for a paid card. annuities that better match your current spending habits.
Walsh, however, is one step ahead. He suggests that as a rule of thumb, it is only reasonable to pay an annual fee on only one credit card. There is nothing else.
“One annual salary is good if you get a benefit from it. But pay two, three, or four credit cards fit doesn’t make sense because you rarely get much benefit from those extra cards,” Walsh said. “And there are also many opportunities for cards out there that offer the same incentives and are free of charge.”
The removal
Performing an annual audit of your credit card information is an important part of staying on top of your finances. A process that can help define not only the benefits that have already been achieved that you want to act quickly to take advantage of but also allow the sun step back and decide if your credit cards are a good fit for your current spending habits and lifestyle. . If a credit card has outlived its usefulness and you’re paying a high annual fee, it may be time to ditch it.