It is no secret that I always use cash. I did not even own a credit card. Well, at least I did not until I did my 30 day credit card challenge.
So we’re curious, how much does using credit allow you to overspend? Can you still stay in budget? I guess the questions stems from, if you go to the store with $20 in cash, you can’t spend more because you would have to put something back… however, if you are just using credit and you spend more than $20, you’re probably more likely just to go ahead and swipe your card before putting something back… Is it true?
We posted this question on our Facebook page. Here are a couple of the tips which were shared by our readers.
“I use my credit card for everything and get dividends paid back at the end of the year. I get on average $800.00 every December.” – Beatka C.
“If you are responsible, credit cards can work to your advantage. I’ve had numerous free hotel rooms and flights using my credit card points. I also get 4% on my checking account if I use my debit card 10 times a month.” – Debi O.
“Use a credit card with rewards. My hubby and I both have a Amazon Rewards card. When our March 2014 baby arrived, most of the stuff we bought for him was purchased on Amazon using our reward dollars.” – Julie E.
“Take advantage of 0% interest promos and pay it off before the promo ends.” Valerie C-S.
“Pay close attention to your online statements and keep track of your purchases. With it being electronic and reliant on technology, mistakes can occur (double charges, etc) that if you don’t keep an eye on can go unnoticed.” Courtney B.
This is all great, but the one thing I noticed was that not one person actually shared how they make sure they do not overspend when using credit. I get that people received some perks from it, but what did they spend to get that. In my case, we exceeded our budget by $50 so we could earn $35 back. We actually ended up losing $15 that month.
The idea is not about the perks, nor the interest. It is not even the fact that it is paid off at the end of the month. The simple truth is that credit card users spend on average 20% more. Then, I wonder, what happens that one month when money is extra tight and you don’t have the funds to pay for it? I really hope that people use credit when they truly have the money in their account.
Now, as far as not overspending, you need to track it. Just like you would if you had cash. Create a budget and monitor your spending. Don’t allow yourself to go over your budgeted amount — even by $5. If you do that weekly, that is $260 in just one year.
One way many do this is with online apps, such as You Need a Budget. When you shop, you enter the amount you spent into the app (even on credit). It keeps track of your expenditures so you know how much you have left to use towards each budgeted item every month. Using this method can help keep you from overspending.
If you don’t use an app, just make sure you are actually tracking it. It is just too important to your budget not to keep track of your spending.
I would love to know how YOU track your spending and ensure you never go over your budget when using credit? Please share with us (and please not about why you use credit, but rather how do you track your spending).