The value you get from credit cards depends quite a bit on how you use them. If you spend responsibly and pay in full, credit card rewards can make you money. Overspending, on the other hand, could put you in debt and cost you.
Continue Reading Below
To ensure you come out ahead, it helps to set goals. Good credit card goals give you targets to aim for and encourage smart financial habits. Here are three simple and effective credit card goals that will keep you on track through 2021.
1. No credit card debt
If there's one way consumers get in trouble with credit cards, it's credit card debt. The average credit card balance in 2020 reached almost $6,000. On a card with an average APR of about 16.5%, you're looking at nearly $1,000 per year in interest.
Considering the cost of interest, paying off credit card debt can be a huge money saver. Here are a few tips that can help:
- Calculate how much you need to pay per month to get your balances down to $0 by the end of the year.
- Review your budget and cut back on nonessential expenses so you can make bigger monthly debt payments.
- Look at balance transfer credit cards with a 0% intro APR. This type of credit card lets you refinance your credit card debt at zero interest for the length of the promotional period.
Even if you don't currently have any credit card debt, you can still set this goal. Instead of paying off debt, focus on paying your credit card bill in full every month to avoid debt.
2. Earn $500 in rewards
Credit card rewards are a fantastic way to get money back on your everyday spending. If you're new to rewards credit cards, the two most popular options are cash back cards and travel cards. Both can work well, so it's just a matter of whether you prefer cash back or points you can redeem for travel.
Now, $500 in rewards may seem like a lofty goal, but there are several ways to hit that mark:
- Pick up one of the credit cards with the best sign-up bonuses. Some of the biggest bonuses offer $500 or more to new cardholders who meet the spending minimum.
- Open a credit card that earns 2% back on every purchase. A little under $2,100 in monthly credit card spending would earn $500 back per year.
- Get a credit card with bonus rewards in areas where you have high spending. For example, you could get a card that earns 4% back on groceries and dining if those are two big expense categories for you. About $1,050 of monthly spending in those areas would get you $500 back.
3. Go up one credit score range
It takes time to boost your credit score. That's why a realistic goal is important. Going up by one credit score range is achievable within a year. Here are the credit score ranges using the FICO® Score system, which is the most widely used:
- Very poor: 300-579
- Fair: 580-669
- Good: 670-739
- Very good: 740-799
- Exceptional: 800-850
There are only a couple of things you need to do to improve your credit. Most important is paying all your bills on time. You also shouldn't use too much of your credit. Ideally, your balances should never exceed 20% of your total credit lines. This will keep your credit utilization ratio down.
If your credit score is already very good or exceptional, you likely don't need to improve your credit much, if at all. In that case, your goal can be to maintain your credit.
You don't need a long checklist of credit card goals for the year. With just these three, you'll save money on interest, make money from credit card rewards, and end the year with a better credit score.
Our credit card expert uses the card revealed below, and it could earn you $1,148 (seriously)
As long as you pay them off each month, credit cards are a no-brainer for savvy Americans. They protect against fraud far better than debit cards, can help raise your credit score, and can put thousands of dollars back in your pocket each year.
But with so many cards out there, you need to choose wisely. This top-rated card offers the ability to pay 0% interest on purchases until 2022, has an incredible cash back rate (up to 5%!), and sports a $0 annual fee.
That’s why our expert signed up for this card personally. Click here to get free access to our expert’s top pick. While it doesn’t influence our opinions of products, we do receive compensation from partners whose offers appear here. We’re on your side, always. See our full advertiser disclosure here.