5 resolutions for credit card holders

By Benjamin Salisbury

Many Brits are likely starting to consider their New Year's resolutions, and for some, they include "improve finances." That could mean resolving to budget, track spending or pay debt. But credit card users should implement some card-specific resolutions, too -- especially those with debt.

The more specific your goals are, the more likely you are to achieve them. Here are five resolutions cardholders can consider make to start toward healthy card habits.

1. Set realistic debt repayment goals.
"One of the best habits to grasp in the new year is better management of your credit card debt," Melanie Taylor, a spokeswoman for Debt Advisory Centre, said in an emailed response to questions. But make sure targets are achievable or you will feel defeated before you've even started. It's better to achieve a lower, more realistic goal than to fail to reach a higher target.new-years-credit-card-resolutions

If you have more than £10,000 of credit card debt heading into the
new year, it might not be possible to clear this by the end of the year -- that's almost £1,000 per month. Chances are, if you're struggling with debt, you can't afford to put that much toward it. However, you could commit to, say, paying 10% of your wages each month to lower the bill. Or, you can vow to pay off a chunk of the debt, say £5,000, by year's end, and not accrue any more in the process.

2. Transfer your balance.
"If you have a hefty balance on your credit card, there are simple steps you can take to clear the debt," said Taylor. One of them is to transfer the balance to a card with a low interest rate or a no-interest promotional
period.

Furthermore, "moving all or part of a debt from one financial provider to another can make it easier to keep track of what you owe and to whom,
and potentially get you a better deal on repayments," Andrew Johnson, money expert at the Money Advice Service, said in an emailed response to questions.

If you're paying interest on your balance and only making minimum (or just above minimum) payments, it might feel like you're trying to dig a hole with someone throwing on extra dirt as you dig -- sure, you're making progress, but it's slow and frustrating. With a 0% interest balance transfer deal, all you're paying is the principle; you no longer have extra dirt thrown in your hole and you can actually make progress.

There is a lot of competition in this area, so you can find some outstanding deals. You might be able to get 24 to 37 months interest-free on a balance transfer, as well as benefit from other extras, such as a lengthy low- or no-interest deal on purchases.

"If you do transfer a balance, make sure you cut up the old credit card and close the account so you don't spend on both cards," said Taylor. You also need to remember that balance transfer deals come with a balance transfer fee, usually about 3% of the balance. Finally, be sure to read all your terms and conditions. You need to know how long your deal lasts and what the interest rate will be if you breach your contract or when the deal is over (though, ideally, you'll pay it off before then).

3. Pay more than the minimum payment.
The more you can repay, the less you'll pay in interest, since the interest is a percentage of your overall balance. And, again, paying each month and barely seeing your balance go down can be demoralising.

"Minimum monthly repayments are often set at low levels -- sometimes as low as 1%," says Johnson. "If you only make the minimum repayment it will take you much longer to pay off your debt, and ultimately you will pay a lot more in interest."

Additionally, you may be tempted to set up an automatic payment for the minimum each month, but doing this could be to your detriment, as you lose sight of your balance.

"It's easy to lose track of what you're spending when using a card, and debt can quickly mount up if you don't pay off your card in full each month," Johnson contends.

4. Review your cards, compare new deals.
Every credit card is different, and every cardholder's situation is different. In fact, your situation could change from year to year. Assess how you use your card and what features you need, which features you want and which ones you can bypass altogether.

If you do the majority of your spending on your credit card, and you pay the balance in full each month, a rewards card might be optimal for you (while they last -- rewards are on the decline). However, if you tend to keep a balance on your card, a rewards card might not be worthwhile, as the interest you incur could cancel out any points you earn. If you have a rewards card you don't cash in on, it might be time to get a more basic card, or find one with different rewards.

If you need a card that offers a 0% interest deal on both balance transfers and purchases, check out some "double-duty" credit cards on the market, which offer lengthy deals on both.

Even if you already have a few cards in your pocket, it might be time to change them up. If you've improved your credit card habits, it might be time to upgrade. If you only have one card, you may want to consider getting another for emergencies or travel.

Online comparison tools have made researching credit cards easy, so there's no excuse not to make certain that you are getting best deal for your current needs.

5. Pay charges immediately.
Ideally, you should pay off your balance in full each month to avoid interest or any other fees, such as late payment fees (which you incur if you fail to make at least the minimum) or over-limit fees.

However, by the time you get to the end of the month, you may realize that you spent the money in your current account elsewhere, and there's not enough left to cover your credit card bill. You balance builds, and before you know it, you're in a vicious cycle.

To avoid a huge lump payment at the end of the month, try paying off your charges as soon as you make them. If you go shopping and eat out, the next morning, log on to your online banking and move the money from your current account to your credit card account. You could even make the transfer immediately if you have a smartphone with your bank's app. Then, you won't have the chance to spend the money on anything else.

See related: Need a balance transfer? Check your wallet first; When it makes sense to not pay off your credit card

Updated: 28 December 2015