Credit cards are magical! They conjure up money we wished we had and provide during those desperate times of need. They are quite handy indeed, that is, until you can no longer give back all that you borrowed. Despite the wonders of credit cards, they are masters in the art of deceit and have done a miraculous job of suffocating those who chose to abuse their generosity. Too many of my family and friends have I witnessed become slave to their own credit card debt.
It’s an awful way to live and further cements the reality that adulting is hard. I understand that needs arise and the only source to fast cash is that which your credit card limit allows. My youngest brother needed new tires for his truck, but simply could not afford an $800 expense. So, he opened a credit card with the tire store offering 0% interest for 12 months to help him get what he needed. While this seems like a very reasonable cause to get a credit, it doesn’t have to be that way if you’re conscious about how and where you’re spending your money, while more importantly creating a plan for the expected and the unexpected.
Here’s 5 tips to help you manage your credit card spending:
Add Credit Card Accounts to mint.com
Adding all your credit card accounts to Mint simply allows you to track spending by categorizing each transaction appropriately. Even though you charged your recent purchase to a credit card, that spending can still be paid for with the available money you have already set aside in your budget. If you have already added your credit card account into Mint, make sure everything is categorized approately into your budget categories.
Only Sign Up For Credit Cards Where You Routinely Shop
This might seem like a no-brainer to some… but I’ll say it anyway. If you don’t regularly shop at store all the time, don’t sign up for their credit card. You don’t need it! You’ll never benefit in the long run from any rewards or one time discounts that they might offer. It’s not worth it! You don’t need to sign up for a credit card (and over-extend yourself) so you can buy an expensive pair of sunglasses or name brand gym clothes.
Don’t Ask For A Credit Limit Increase if You Don’t Need It
When you apply for a credit card, and you’re approved, you are issued a credit limit based on your credit history. This limit will vary for every person and every credit card you apply for. Depending on your limit, it could be very easy to max out your limit if you’re not paying off the balance every month. In some cases, it easy to request a credit limit increase so you can continue to make more purchases or in anticipation of a larger purchase than what your limit allows. This is nice… but honestly… don’t go increasing your limit just because they will let you. Furthermore, from a credit score standpoint, maxing out your credit limit simply shows that your incapable of making the necessary payments. Which takes your score down and your likelihood of being approved for loans and other credit cards.
Have A Plan to Pay Off Large Purchases Before You Buy
This is my responsible adult tip – make a plan to pay off a large purchase before you actually buy it. Whether it’s a fridge, couch, or a trip to Europe. In other words, have the money already set aside before you charge your credit card so you can pay it off at the end of the month. It is so much easier to save a little each month leading up to the purchase of something new then paying outrageous interest rates.
For example, a few weeks ago I was walking up to my car in the parking lot and took notice of the tread on my tires. Thinking to myself, “Well darn! Those don’t look brand new anymore.” Based on my mileage, I decided that I might have a year to a year and half before they will need replaced. I checked to see what it would cost to replace them and I added them to my monthly savings plan so that when the day comes they need replacing, I’ll be ready for it. I refuse to be blindsided by such a large expense that it ruins everything else I’m working towards.
Pay Off Your Credit Card Each Month
If you’re following most of the tips I’ve outline above… then there is no reason you can’t be paying off your credit card each month. Money should already be set aside for every purchase that is made making it easy to zero out each of those accounts.
Keep in mind that tracking spending and make a plan for large purchases doesn’t mean you can’t enjoy life. Not in the least. All it means is that you’ll be enjoying life without 20% interest. It means that you can enjoy life without being burdened by extremely expensive debt and truly come to understand that old saying of, “Live in the moment.”
Besides, paying of your credit cards each month means you don’t only save money that would have gone towards interest rates, but you also get to enjoy the credit card rewards for spending money on that card. Getting rewarded for spending money is the best kind of shopping… so long as it doesn’t cost me 20% interest.