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Credit Card Resolutions for 2011

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2011 Credit Cards imageThere’s no reason why you can’t make 2011 your best credit card year ever. What does that mean, exactly? It means that 2011 is the year you take control of your credit cards. It sounds so cliche to say that knowledge is power. But when it comes to credit cards, truer words were never spoken.

#1: Know your “baseline” credit information

If you don’t know what’s in your credit report or what your current credit score is, you can’t make solid credit decisions. You can get a free credit report at AnnualCreditReport.com. You’re entitled to a free report every year from each of the big three credit reporting agencies: Equifax, Experian, and TransUnion. Read the report carefully and look for errors. Amazingly, a study by U.S. PIRG showed that 79 percent of reports contained errors, with 25 percent containing serious errors. If you find an error, dispute it immediately with each of the big three credit reporting agencies.  (See Credit.com’s Guide to Correcting Your Credit Report for more information.)

After you check your report, request your credit score. Don’t despair if your report is ugly or if you have a credit score below 600. In 2011, you can make progress and make your credit life better.

#2: Take time to compare credit card offers

Credit card offers these days have such encouraging words on the envelope: You deserve this card! You’re getting back on track! Don’t get too flattered because millions of other consumers are being told the same thing. If you’re really interested, though, keep the offer and then compare it to other cards. Bottom line: Get the best deal you can possibly get given your credit score and what your needs are. Now, that’s something you really do deserve!

#3: Read every boring piece of mail

And then read it again. I know this probably sounds harder than it was to stay awake in your high school physics class, but this simple task is the key to empowerment. Since the CARD Act has been in place, there’s more transparency. This means the card issuers are required to tell you—in plain English, if possible—about changes to your card agreement. Granted, information still isn’t presented in a straightforward manner. But things are a bit clearer nowadays and with the new Consumer Financial Protection Bureau ready to roll by mid-2011, clarity will continue to improve. And when you read your mail you won’t always be surprised by “hidden” fees. Sure, there will still be a few surprises, but being on top of your mail minimizes these “gotcha” moments with your card issuer.

When you know the status of your APRs and fees, the power in the relationship with your card issuer shifts back to you. You decide if the terms and conditions are acceptable, and if they’re not, you can call your issuer and do something about it.

#4: Don’t buy stuff you don’t need just to get rewards points

If you’re a rewards junkie, you’re not alone. And if you don’t have a healthy relationship with your rewards card, you can end up in debt trying to rack up enough miles for a “free” trip to the Bahamas. This Federal Reserve Bank of Chicago study shows that consumers spend more when using rewards cards. I have no doubt that this is true for many consumers, but to me, this all comes down to being responsible with credit cards, whether you’re getting cash back or not.

But I totally agree that rewards cards aren’t for everyone. So if you’re someone who can’t control your spending if you have a card offering the prospect of unlimited miles, then maybe it’s best to steer clear of rewards cards.

#5: Track your spending to stay out of debt

The problem with credit cards is that it feels like free money, doesn’t it? You want something, you hand over your card, and the item is yours. Money never appears to be changing hands. This is why it’s important to not only set a budget for credit card expenses, but to actually track what you’re spending. This step is especially important if you have a joint account with a significant other or authorized users on your account.

You must set a limit for credit card expenses that’s less than the amount that you think you can pay off when the statement arrives. Life is full of surprises, so leave room in your budget for unexpected expenses. Then you have to have a system in place that alerts you when you’re approaching a limit. I use Mint.com to track how much I’ve spent on credit cards as well as on my other expenses. If I get close to one of my pre-set limits, I get a friendly e-mail alert.

Many banks and card issuers also offer a service similar to this. Find a free program that you’re comfortable with so you’ll stick with it. And when you approach your limits, step away from the cards.

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