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How to Spring Clean Your Wallet

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As the grass turns green again, and the days get longer, many Americans are undergoing their annual ritual of spring cleaning. Not only is this habit healthy for your household, but it can also make sense for your wallet. Here are some tips on how to do it.

1. Pay Down Your Debt

About half of all American credit card users carry debt on at least one of their credit cards. And as unsecured debt that is never tax deductible, credit card debt can be surprisingly costly. So this spring, it’s a good idea to take a look at all of your credit cards and see how much debt you have, and what interest rate you are paying on each account. Over the winter, the prime rate rose by a quarter point, which has prompted some issuers to raise the interest rate of credit cards with variable rates. If you are unable to pay off your debt within a few months, it may be a good idea to open a new credit card with 0% interest for balance transfers.

2. Examine Your Credit Limits

Another thing you can look at this spring is the credit limit of each card you have. If you find yourself regularly using more than 30% of your credit limit, you could be hurting your credit score by having a high debt to credit ratio. This is the ratio of your total amount of debt divided by the sum of your available lines of credit. To alleviate this concern, you can request to have your credit limit raised. To have the greatest chance of being granted a credit limit increase, it can help to pay off as much of your outstanding balance as possible. As the old saying goes, it’s as if banks only want to lend money to people who don’t need it.

3. Optimize Your Rewards

If you avoid interest charges by paying each month’s statement balance in full, then you have the ability to earn rewards for your spending at no additional cost. If that’s your case, spring is a good time to re-familiarize yourself with the rewards programs you have for your cards, as they can change over time. Take a look at what types of purchases qualify for bonus rewards, and if there are any limits to the amount of purchases that qualify for rewards.

4. Out With the Old, in With the New

The credit card market is constantly changing, and credit card users continue to enjoy new and improved products from banks and credit unions. So as you go through your credit cards, take some time to see what new credit cards are available, and if their rates, fees, rewards and benefits might be superior to the cards you currently hold. If you find better offers are available, you can sign up for a new card, possibly enjoying a sign-up bonus as well. Then, you can retain your old card or cancel it when the annual fee comes due.

Before applying for any new credit card, remember that it’s important to know where your credit stands so you don’t apply for cards you’re unlikely to qualify for (hard inquiries can drop your credit score). You can check your credit scores for free every month on Credit.com.

5. Re-Evaluate Your Benefits

Most credit cards include a number of benefits that few customers are aware of. For example, your purchases may be covered by an extended warranty policy, have damage and theft coverage, and even be eligible for price protection and return protection. When traveling you may have benefits in the event of trip delays and interruptions, lost and delayed luggage, automobile rental insurance. And if your card is offered in partnership with an airline or hotel chain, then you can expect a number of benefits when making reservations with those companies.

So this spring, take the time to look through your credit cards, and find out how you can receive the most value from them throughout the rest of the year.

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