social

Think of Using Credit as Spending Money


Bronze Tip Medal for All Time! 75 Tips

One trap that many of us fall into is thinking about spending money and using credit as different, when both affect our monthly budget. We may buy something on credit that we would never consider paying cash for. We might even buy things using a debit card, essentially the same as using cash, that we would think twice before we handed over actual bills.

Advertisement

I've been using Quicken to keep track of my budget for the last several months, and one of the first things that struck me was how it categorizes every dollar I spend as an expense, whether it was paid for using cash, check, my debit card, or a credit card. If I spend $50 at the grocery store, it is reflected in my food budget no matter which card I used.

A credit card is a great tool to have in an emergency. If you have a flat tire, you need to get it fixed and don't want to worry about whether you are going to bounce a check or not. Using a credit card allows you to pay off this unexpected expense over a couple months. Credit cards can also be useful for online purchases since they provide more protections than a debit card. But, many of us use our credit cards far more routinely. Any time an expense which doesn't fit right into our budget comes up we charge it. Sometimes we do this because something is on sale and we want to lock in the price. It is very easy to run up a balance on the card, and then we are wasting money on interest payments rather than on things we actually need.

Advertisement

When you go to pay for something with a credit card, ask yourself if you would buy the same thing with cash? Since you will probably end up paying interest on your purchase, ask yourself if you would pay half again as much in cash? Stop thinking of the credit card as a way to avoid paying for things out of your monthly budget.

Try to get into the habit of paying off your credit cards in full every month. You can have the peace of mind knowing that you can take care of your family in an emergency without impacting your budget with the expense of interest every month.

About The Author: Fletcher is one of the founders of ThriftyFun. You can usually find him feverishly typing code to make the site more responsive and stable. He is crazy for Legos, has a degree in mathematics, and is always trying to be more frugal.

Advertisement

Do you have any tips on how to think about credit and spending? Let us know in the discussion.

Credit card machine spitting out cash.
 

Add your voice! Click below to comment. ThriftyFun is powered by your wisdom!

 
July 13, 20111 found this helpful

What a great way to put it! I like the idea of thinking of credit as cash.
Another way to go about using credit is to actually make money off your credit card. My fiance was fortunate to have the good credit to be offered a rewards card and make enough money to pay it off monthly. As a result, we often pay for groceries, take out, gas, whatever with it as long as we stay within a certain monthly budget.

Advertisement

At the end of the month he pays it off and we rack up the rewards points! After we rack up a certain dollar amount in points, we spend it on some big thing we've been drooling over patiently. So in the end, we actually make money off the credit card company! Obviously this won't work for everyone, but if you're able, take advantage.

 

Add your voice! Click below to comment. ThriftyFun is powered by your wisdom!

 
In This Page
Next >︎
Categories
Budget & Finance Credit CardsJuly 13, 2011
Pages
More
🐰
Easter Ideas!
🍀
St. Patrick's Ideas!
🌻
Gardening
Facebook
Pinterest
YouTube
Instagram
Categories
Better LivingBudget & FinanceBusiness and LegalComputersConsumer AdviceCoronavirusCraftsEducationEntertainmentFood and RecipesHealth & BeautyHolidays and PartiesHome and GardenMake Your OwnOrganizingParentingPetsPhotosTravel and RecreationWeddings
Published by ThriftyFun.
Desktop Page | View Mobile
Disclaimer | Privacy Policy | Contact Us
Generated 2024-03-15 01:16:13 in 2 secs. ⛅️️
© 1997-2024 by Cumuli, Inc. All Rights Reserved.
https://www.thriftyfun.com/Think-of-Using-Credit-as-Spending-Money.html