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Your year-end credit card review: 5 questions to determine what’s worth your keeping in your wallet

Photo illustration of a hand outstretched with a credit card hovering above it.
Many consumers typically do not use their cards to the fullest potential.
Photo illustration by Fortune; Original photo by Getty Images

As each year comes to a close, it’s important to engage in financial housekeeping. It’s a task that should include, among other things, reviewing overall spending patterns, your progress toward savings and retirement goals, and not to be overlooked—reviewing your credit card accounts.

An annual credit card audit can yield a variety of useful information. Perhaps chiefly, this exercise helps identify credit card benefits and rewards that may be set to expire as the year elapses. But that’s merely one of the reasons to engage in this task. There are many other financial and credit score-related benefits associated with conducting a thorough annual review of your credit cards.

The importance of conducting an end-of-year review of your credit cards

From one year to the next, your spending patterns may change, your lifestyle may evolve and along with these shifts, may come a change in how you use your credit card accounts. It may mean you’re not using some cards at all anymore, or maybe you’re not making the most of rewards programs that were once valuable. 

If some—or all of this—rings true, a credit card audit or annual review can be especially helpful. 

“We encourage cardholders to regularly review their wallet to ensure the credit cards they carry are a fit for their lifestyle and spending habits,” says Krista Phillips, an executive vice president and head of consumer credit cards at Wells Fargo. 

Many consumers typically do not use their cards to the fullest potential, continues Phillips, and may be leaving valuable rewards, bonuses, credits, or other benefits associated with the card on the table.

There may also be particular credit cards that you haven’t used all year long and as a result, may be closed by the issuer—which could ding your credit profile (more on that later). Alternatively, if you’re not using a card at all but are still paying a pricey annual membership fee, it may be hard to justify continuing the relationship. 

“By taking a step back to assess your cards, you can gain a clear understanding of whether they’re working for you, how you can use rewards so that they don’t go to waste, and any other available perks and benefits to ensure you’re getting the most value out of your card,” says Phillips.

Here’s a deeper look at some of the valuable reasons to conduct an annual credit card audit. 

1. Have you met the requirements to earn valuable credits?

Some credit cards provide annual statement credits to customers who engage in specific types of spending during the course of the year. Typically, these credits are associated with general travel-related spending or, specifically airline ticket purchases. For other cards, there may be credits provided each year in association with streaming purchases you made.

These programs often come with specific spending thresholds that must be met, as well as expiration dates by which you must meet those requirements. That means the benefit cannot be rolled into a new year. And if you have not met the spending requirements, you’ll miss out on the annual perk.

By identifying this information through an annual review, you can decide which benefits are especially valuable to you and worth pursuing before the deadline arrives. This may even mean making additional purchases or engaging in additional spending if need be to earn the credit. 

But there’s an important caveat here. Elly Szymanski, assistant vice president of credit card products for Navy Federal Credit Union, cautions against needless spending in pursuit meeting such program requirements.

“Regardless of the offer, you shouldn’t continuously swipe your card or change your spending habits just to earn rewards,” says Szymanksi.”If there’s a spend threshold you have to meet…the spending amount should be realistic within your current budget and lifestyle.” 

2. Are there any expiring bonuses to take advantage of? 

Similar to the expiring opportunities to receive statement credits for specific types of spending, there may be bonuses that expire annually if you don’t meet certain spending requirements. This is often true with airline and hotel credit cards that offer annual bonuses ranging from upgraded status to mileage awards or companion flying passes. In the case of hotel credit cards, the bonus may be free hotel nights.

Additionally, many credit cards promote welcome bonuses when you open an account, and earning those bonuses typically requires spending a specific amount of money within a defined period. 

Again, by reviewing your account annually, you’ll be able to assess which of these opportunities you may have overlooked and take action in enough time to ensure you earn any bonuses that are important to you. “If you are close to the spend threshold to earn that bonus, it may be worth a purposeful purchase that will help get you there,” says Phillips.

The emphasis here however, is on the word purposeful, as opposed to frivolous or unnecessary spending.

3. Are any free trials ending? 

In many cases, a new credit card may come with free trial offers. This could include streaming services, delivery services, and more. But all good things come to an end and this includes the free streaming that your credit card issuer was picking up the tab for. 

As you conduct your annual credit card review, it’s important to decide whether you’re interested in continuing such services on your own and whether the cost fits within your budget. If the answer is no, you’ll likely need to opt out of the service in question.

4. Do you have any unused credit cards?

Memo to credit card holders everywhere: It’s not unusual for credit card issuers to close an account simply because you haven’t used the card for an extended period of time. When this happens it can trigger a decrease in your credit score. That’s because a closed account impacts two of the factors used to calculate the score. 

To begin with, a closed credit card may reduce the overall length of credit history on your credit report. This is particularly problematic if the account eliminated was one of your longest standing credit cards and your remaining accounts were opened much more recently. Credit history length is one of the ways your credit score is calculated.

A closed credit card may also increase your credit utilization ratio.This is because closing an account reduces your total available credit. And a higher debt-to-credit utilization ratio will bring down your credit score.

To avoid these credit score ramifications, you might want to find a way to spend even a small amount on your typically unused cards each year, in order to keep them active.

“Consider just putting something small like your Netflix subscription on a credit card to keep it open,” says Brian Walsh, a certified financial planner and senior manager of financial planning with SoFi. “And maybe put your HBO Max subscription on another card to keep it open.”

But if you’re going to take this approach, cautions Walsh, be sure to set up autopay for each credit card bill and pay the balance in full each month, so that you don’t end up racking up a balance that you’ve lost track of, and hurting yourself financially in the long run.

5. Did you spend enough to make the annual fee worth it?

This is perhaps one of the most fundamental questions to consider when conducting your credit card year-in-review. Many credit cards charge an annual fee in exchange for all of those fun perks and programs. Paying that fee, however, really only makes sense if you’re actually utilizing those bonuses, perks, programs, or other rewards year after year. If, as your lifestyle evolves, you stop getting value out of a card and its offerings, it may be time to part ways and save yourself some money.

“Know when a credit card with a fee is worth it, and when it’s not,” says Szymanski. “If your card has an annual fee of $100, but you only earn and redeem $50 in rewards points, the card isn’t worth your time.”

The good news is that most credit card issuers waive their annual fee during the first year you have the account, which provides an ideal opportunity as a savvy consumer to test out your spending with the card and determine how to get the most out of the rewards.

In cases where you’re not earning and redeeming enough rewards to justify continuing with the card and its annual fee, experts often recommend switching to a no fee-card or finding a different annual fee card that better fits your current spending habits.

Walsh, however, takes it one step further. He suggests that as a rule of thumb, it only ever makes sense to pay an annual fee on just one credit card. Nothing more.

“One annual fee is ok as long as you’re getting a benefit out of it. But paying two, three, or four credit card fees doesn’t make sense because it is extremely rare that you are going to get that much benefit out of those extra cards,” says Walsh. “And there’s also plenty of opportunities for cards out there that offer equally compelling awards and don’t charge any fee at all.”

The takeaway

Conducting an annual year-in-review look at each of your credit card accounts is an essential part of staying on top of your finances. It’s a process that can help shed light not only on expiring benefits that you may want to act fast to take advantage of but also allows for taking a step back and deciding whether your credit cards are still a good fit for your current spending habits and lifestyle. If a credit card has outgrown its usefulness and you’re paying a steep annual fee, it may be time to part ways.

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