Financial housekeeping: 7 things to check off your list

By Benjamin Salisbury

financial-housekeeping

If you have multiple credit cards it can be tricky to keep tabs on all the detailed rules linked to each deal, but one mistake could mean you lose the benefits of a card's promotional offer.

November 2016 research from the Co-op Bank found that 20% of the 14.4 million Brits who signed up for a 0% balance transfer deal between 2011 and 2016 lost the promotional rate after breaking the terms and conditions by missing payments, making a late payment or exceeding their credit limit. This cost them a combined £948m each year in extra interest.

This is why it's important to do basic housekeeping with your credit card accounts to check that you are paying what you should be, renegotiate rates at the end of promotional periods or switch to a better deal.

A review of your credit card accounts will also flag any unexpected payments you have made on your credit card, possible fraudulent activity and whether the terms and conditions have changed without you realising.

Use this credit card checklist to fine-tune your finances:

1. Check your credit limit.
Sometimes a lender might raise your credit limit without you realizing that happened. Banks should send you notification that your limit is increasing, but often, these notes get overlooked or tossed in the bin without being read.

"Think carefully before you accept a higher limit - and say no if you think it will tempt you into borrowing more than you can comfortably afford to repay," Melanie Taylor, debt expert at Debt Advisory Centre, said in an emailed response to questions.

If you don't want a higher credit limit, contact your provider and ask to have it reduced. Not only will a higher credit limit tempt you to overspend, but if you have access to more credit than you need, it may be harder for you to get credit in the future.

"Lenders can be wary of lending to you if it appears you already have a lot of credit to your name (even if you don't use it), so old accounts can affect your ability to get new deals," Paul Wiseall, brand and campaigns manager for credit reference agency Callcredit, said in an emailed response to questions.

2. Check your APR.
When you applied for credit, you were offered an interest rate, known as the annual percentage rate (APR), the rate charged on the money you borrow. Make sure it is still the same and has not been raised without your knowledge or agreement.

If your account is in good standing, it might be possible to ask for a lower rate, and when you're doing a sweep of your finances is a good time to call.

3. Close unused credit card accounts
Cancel unused credit cards because they show up on your credit profile. Don't just leave the accounts dormant, because the credit limit on them will form part of your overall credit exposure and will be factored in by lenders assessing your credit risk for future lending.

"If you've got any credit cards that you aren't using, then it is good practice to close them," Taylor said. "They may be acting as a drag on your credit score."

"Old or idle accounts may also cause unnecessary fees and can be targets for identity thieves," Wiseall said.

However, try not to close down your oldest accounts - you don't want to lose your good repayment history. But if you have a wallet full of store cards you signed up for to get a special promotion or a couple of balance transfer cards you paid off, you should close those.

4. Stop forgotten, recurring payments.
Check your credit card statements: see any payments you don't recall making, or that seem out of place in any way? If so, find out what they are for. Cancel recurring charges for services you no longer use, such as old magazine subscriptions or a barely-used gym membership.

Check also for any other special one-off payments or chargeable premium services linked to your credit card account, and cancel these payments if you no longer use the services.

5. Check for fraudulent or unexplained charges.
If there are payments you don't recognise or charges that don't appear to be from your card provider, you could be the victim of fraud.

"If you spot activity that you don't recognise, contact the lender directly," said Wiseall. "Sometimes, it's as simple as the company you make payments to now operates under a different trading name.

"However, if the activity does prove fraudulent, the lender can work with you to prevent further fraud."

Remember, you will usually be covered for fraudulent activity on your account, but this must be investigated and rectified. Make sure any fraud has not affected your credit score, and if it has, contact credit reference agencies to dispute the entries linked to the fraud.

"Check each account on your credit report to ensure all other accounts are appearing as you'd expect them to be," Wiseall said. "Monitor this over the coming months, as it can take four to six weeks for lenders to send up-to-date credit account information to credit reference agencies."

6. Check all fees.
Check all fees and interest charges. What are the fees for? Are they justified, or should you dispute them? Does the interest you're paying match what you think you should be paying?

"Whilst you've got your statements out, make sure you're not being hit with any charges for late payments or not paying the minimum payment," Taylor said. "If you are, set up a direct debit with your card provider to ensure you never miss a minimum payment again."

7. Check the status of any promotional deals.
One of the biggest causes of unwanted and unnecessary credit card charges is not paying off a balance or not switching to another good deal when one promotional offer ends. Make a diary date a month or so before any offer ends and scour the market to switch to another deal that's appropriate for you, or make sure your balance is paid off before the end of that month.

It's best to do this type of "housekeeping" at least a couple of times a year, but even once a year is good. Whether you do it as you spring clean your home or as you prepare for a new year, be sure to set aside the time and mark it in your diary so you can stay on top of your finances.

See related: How to avoid and stop 'grey charges', How to safely dispose of an old credit card, Clearing up confusion over credit reports, scores

Published: 7 March 2017