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How to Live Within Your Means on Credit Cards

Gerri Detweiler

You’ve seen the warnings that consumers spend more when they use plastic as opposed to cash. But is it still possible to live within your means and still use credit cards?

“Absolutely,” says Mikelann Valterra, a money coach and founder of MoneyMinder online spending tracker. “If they track their (credit card) purchases in their financial tracking software on the day they make them, they will spend less money,” she says. Valterra says that recording purchases doesn’t just help consumers keep tabs on where their money is going. “It balances out the brain,” she says, referring to the flood of brain chemicals that occur when we buy something pleasurable.

Cambridge Credit Counseling has found that for those who enroll in a Debt Management Plan (DMP) to pay off their credit card balances, 89.3% of those who track their expenses find specific items in their budget that can be reduced.

Still, there is always the danger that credit cards make it too easy to overspend.

Some 19% of consumers spend more than they earn, and one in three say they don’t pay more than the minimum payments on their credit cards, according to FINRA’s National Financial Capability Study. That’s a lot of consumers who are not living within their means when it comes to using their credit cards.

Credit Cards After Debt, With a Caveat

After Carrie Rocha, founder of Pocket Your Dollars, and her husband dug their way out of $60,000 in credit card debt, they didn’t cut up their credit cards. They still use one for online purchases and travel.

But they are cautious. They’ve avoided the temptation of using their credit cards for pay for more things in order to earn rewards, for example.

Rocha says this is a very real problem, noting that people often really feel like they are losing out if they don’t use their credit cards to earn rewards. But for someone who doesn’t pay the balance off in full, trying to chase rewards is fruitless. “One month’s of interest wipes out that 1% reward,” she points out.

And although she views a credit card as simply a payment tool, she adds this caveat: “A credit card is to be used as a payment method of choice for certain purchases all of which should be planned for,” she says, emphasizing the words “planned for.”

Practical Tips for Credit Card Spending

Christopher Viale, president of Cambridge Credit Counseling Services, agrees. He recommends consumers avoid making credit card purchases they can’t pay off in full within a month or two unless it is an absolute emergency.

He provides another rule of thumb that can help maintain stronger credit: “If you’re using more than 30% of your credit limit, back off until your balance is comfortably under that mark, and make sure you pay your credit card bills on time every month to help build your credit score.”

Valterra also suggests changing your due date on your credit card to the last day of the month. That way, as long as you pay your bill in full, you will force yourself to to pay for purchases the same month you make them. “The billing cycle usually falls mid-month and that is really bad for people’s brains,” she says, referring to the fact that cardholders must budget to pay off a previous month’s purchases the following month.

Notice she says credit “card” and not “cards.” She encourages consumers to stick with one card to make it easier to get a handle on where their money is going.

The Quick Tips

  1. Record your purchases the same day you make them.
  2. Don’t fall into the trap of using credit cards just to earn rewards unless you can pay the balance off in full each month.
  3. Ask your card issuer to change your due date to the end of the month.
  4. Use one card so you can keep better track of your total spending.
  5. If you find yourself using more than 30% of the available credit on a particular card, stop using that card until your balance is paid down.

“The number one thing is to recognize that your credit card limit is not your means,” warns Rocha. “Your income is the cash money that people pay you. That is your means.”

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