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The start of a new year often serves as an unofficial cause for change. That might mean a new gym routine, healthier eating habits, or a more focused approach to school or work. A new calendar year is also an opportune time to assess your credit card portfolio! When making this kind of evaluation, the ultimate goal is to maximize the value you get from your wallet. Below are some helpful questions to ask yourself throughout the process.
Do I Benefit From My Current Cards?
Assessment of your credit card portfolio begins with an analysis of the current state of your wallet. Particularly for cards that charge an annual fee, you need to determine if the perks and rewards justify holding the card over the long term. That might sound like an easy question to answer, but a quantitative evaluation might prove difficult for cards that offer qualitative benefits.
I like to think of card benefits in three distinct categories:
- Fixed Dollar: These are card benefits that provide a fixed-value return to the cardholder. Largely, these perks are supplied on a calendar year basis. Examples include general travel or airline incidental credits (included on premium rewards cards), or the Saks Fifth Avenue credit on the The Platinum Card® from American Express. Are you making sure that you use the full credit from all of your cards?
- Fixed Redemption: These are card benefits that have no specified dollar value, but are provided for annual redemption. The most obvious example in this category is the hotel free night certificates offered by many hotel-branded credit cards. It's hard to know exactly how to value a free hotel night because the redemption likely changes year over year. One year, the free night might replace a $500 hotel room, and the next year it might replace a $100 hotel room. As an example, I hold the Hilton Honors American Express Aspire Card and used the card's free weekend night during a trip to the Maldives with my wife this past year. That is not a vacation we take every year, though, and in 2020 we are far more likely to redeem the card's free night on a more modest trip. Have you made sure to use any fixed redemption perks your credit cards offer?
- Variable Redemption: These are card benefits that have no fixed dollar values or redemptions, and are largely qualitative. Perks like lounge access, free checked bags, hotel program elite status, and more will all have different values to different cardholders based on how frequently they are used. Not only will usage vary by individual, but also the value of these benefits will be different for each person.
Have My Cards Experienced Changes To Benefits Or Fees?
Much like frequent flier programs, credit cards and their costs and benefits are subject to change. Sometimes these changes are relatively minor, like an annual fee increase from $95 to $99. Yet, much more often, it seems to be the case that cards experience significant shake-ups. For example, Citi announced changes to its premium Citi Prestige® Card back in 2018, the last of which went into effect recently. Looking to 2020, Amex announced a major overhaul of benefits for its suite of personal and business credit cards. When card benefits undergo such extensive changes, it's essential to evaluate whether or not the card benefits still outweigh the annual fee.
In Which Bonus Categories Do I Spend The Most?
Savvy award travelers know that it is crucial to maximize your return on everyday spending. The key to realizing a maximum return on purchases is to utilize the bonus categories that various cards offer. Some cards, like the Chase Freedom®, offer rotating bonus categories that change each quarter. However, most cards feature fixed bonus categories. Common bonus categories include:
- Supermarkets and Groceries
- Travel Purchases
- Dining and Restaurants
- Gas and Fuel
- Office Supplies and Mobile Phone Services
- Advertising and Shipping
- Everyday Purchases
Identifying the bonus categories where you spend the most will help you decide whether or not your current suite of cards is getting you the most for your purchases. Do your credit card bonus categories align with your spending? And do you put your categorized purchases on the most rewarding card?
Are There Better Credit Card Options Available?
Once you have had a chance to assess your credit card portfolio, you can take the next step of making any desired changes to your wallet. Quantifying whether you use all the perks and benefits of your cards, if your card benefits have changed, and whether your wallet is optimized for the bonus categories where you spend the most will help you make informed decisions for your overall credit card portfolio. Perhaps your credit card portfolio assessment has shown that you only earn 1% back on everyday purchases, and you plan to sign up for a new card to increase your return on everyday spend. Maybe your evaluation has shown that you don't make use of premium credit card perks enough to justify holding a particular card. And you plan to downgrade your card to keep the points you have accumulated without paying such a high annual fee. Or, perhaps one of your cards has announced sweeping changes that make the card less valuable to you, and you plan to cancel it entirely.
After all considerations are made, a decision might not be clear cut. Some individuals might prefer to earn transferable points, while others might target one specific rewards currency, or even cash back. There could be external factors in play, such as your 5/24 status with Chase. Or perhaps you have specific travel goals in mind in the coming months where certain credit cards will help achieve those goals. As long as you make an honest assessment of your credit card portfolio and establish an action plan going forward, you set yourself up for great success in the world of points and miles for 2020 and beyond!
Will you be making any changes to your wallet this year?
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