9 good habits of clever credit card users

By Marianne Curphey

January is generally fraught with resolutions: I will lose weight, I will eat better, I will get my finances in order. But often, it's hard to follow through on these vague promises: what exactly constitutes "finances in order"? Try taking on a different attitude and set some tangible, specific goals instead. If better financial well-being is on your radar, try some of these habits of clever credit card users to get on track -- and stay there.

1. Change your card as your needs change
Your credit needs aren't the same when you're 35 with a spouse and two kids as they were when you signed up for your first card at 18. While it's vital to keep a long-term relationship with at least one credit card to prove a good repayment history and show that you're in good standing, you should reassess your plastic every so often and determine if it's still the best option for you. good-credit-habits

If you've been relying on one card for several years, it won't hurt to apply for another one, say, with rewards or a higher limit. If you now travel often, it might be time to take part in an airline rewards scheme.

And if you get a new card, you might score a good sign-up bonus: free points or a waived annual fee for the first year.

"The best deals are stacked in favour of new customers," says David Black, banking specialist with Consumer Intelligence.

2. Pay by direct debit
"Make sure you will not miss any payments by setting up a direct debit which will pay some, or all, of your balance off each month," says Simonne Gnessen, who runs Wise Monkey Financial Coaching.

The added bonus of this habit: you only have to set it up once, then you don't have to worry the rest of the year. Setting up direct debit is an easy way to check off one goal from your list, which can give you the motivation to tackle another one.

3. Schedule a payment day that works for you
If you're having a hard time paying your bill because it's due in between paycheques, call your issuer and ask to have the due date moved. Then, you can pay your bill on payday and know exactly how much money you have to work with until the next payday.

If you have changed jobs and now get paid on a different day, make sure you also alter the day your bills and other payments leave your account.

4. Try to pay more than the minimum
"Even paying off £10 extra a month can reduce the amount of time it takes you to pay off your debt by half," says Gnessen. "Small amounts can make a significant different and reduce the overall debt balance that you eventually repay."

5. Use all your cards at least once a year
If you ignore a card for too long, the issuer may deactivate it, which could result in an embarrassing moment at the checkout. Make sure you know the terms of your card agreement (including how long you can go without using it).

6. Let your card company know if you are going abroad
Anytime you know there will be irregular activity on your credit card -- such as a trip abroad or a large purchase -- it's best to let your provider know beforehand. Otherwise, the issuer may freeze your account due to "suspicious activity."

"Notify [the issuer] to make sure your card isn't refused in a foreign country," says Black.

7. Don't allow lifestyle inflation to lead to debt
Whether you get a bonus, a raise or a second job, try not to use the extra money to supplement a lifestyle you can't really afford. It can be easy to think it's OK to splurge more often when you're earning more, but that spending can add up quickly and lead to more debt than you had before.

"Don't use a promotion and pay rise as an excuse to start loading up your card with new expensive luxury goods," says Gnessen.

8. Don't forget to use your perks
Some credit card rewards expire. Make sure you know how long your points or other rewards stay in your wallet so you don't lose them. And earning rewards can take work, so don't let that work go to waste.

Quite aside from that, Andrew Hagger, director of MoneyComms, says there may be a reduction in the incentives or perks being offered on cards this year, thanks to an EU ruling against excessive credit card fees that could affect the profits of Visa and MasterCard (though the legislation passed in 2011, it only came into effect in 2014). So if you do have a cashback or reward card, make the most of it now.

9. Switch your card debt to reduce your interest bill
There are many good balance-transfer deals on the market. If your credit card is charging hefty interest, try switching the debt to avoid the interest and pay down debt faster.

"If you have credit card debt, take advantage of 0% [balance transfer] offers, then move your debt across," says Yvonne Goodwin, independent financial adviser and director of Yvonne Goodwin Wealth Management. "If your debt is £2,000 and it is a 20-month 0% offer, set up a direct debit for £100 per month so that you both pay off your debt and don't inadvertently run into interest charges afterward."

See related: 4 tips for avoiding balance-transfer traps, Understanding and avoiding credit card fees

Published: 13 January 2015