How to Keep Track of Your Budget With Credit Cards

August 26, 2008 By Debbie Dragon

It’s been proven the best way to take advantage of a rewards program (whether the reward is miles, cash back, or merchandise), is to use your credit cards for all monthly purchases and expenses, and to pay it off in full at the end of the month.

For the not-so-financially disciplined, though, charging everything all month long can be devastating to your wallet when the credit card statement comes and there isn’t enough money in your checking account to pay it off.  When you start carrying a balance from one month to the next on a rewards card, the amount you end up paying in finance fees and interest will almost always cost you more than what you get back in rewards - but the only way to really accumulate rewards is to use your rewards credit card as much as you can every month to rack up the rewards!

How can you keep track of your budget when using a rewards credit card for all of your monthly expenses, so that when the statement comes you can pay it off without a doubt?  The trouble with using a credit card for everything you buy or pay for each month is that credit cards typically cause people to spend more than they would if they were paying by cash.  When you’re grocery shopping, you might add a few extra boxes of cereal since you’re paying on credit…. when picking up school supplies and clothes for the kids, you might allow them an extra outfit or shoes when paying with credit… and you’re soon spending well over your monthly budget.

The solution is quite simple.

When you use your credit card, record the transaction in your every-day checkbook, just like you were paying with cash.  Every trip to the grocery store, every gas station fill up or bills you pay with automatic payments from your credit card, record it in your check register.  This way you can see exactly how much money you are spending, and not get carried away just because your swiping the credit card instead of writing out checks.  In order to make it easy to find your credit card transactions, you can use a highlighter so that when your credit card statement comes, you can match up your checkbook transactions with the list of transactions on yoru credit card statement, and then write a single check to pay the card off in full - every single month.

Posted in budgeting, credit cards, financial plans, personal finance

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