Sticking to a budget can be tough if you don't have a system in place for tracking your purchases. But, your credit card may have features that can help. If you're looking for ways to manage your spending, consider these methods.
Keep all your purchases on one credit card. Using one credit card for all your purchases can make it easier to keep track of how your spending compares with your budgeted amounts. This allows big-picture thinkers to make adjustments.
There are other benefits, too. "Part of the value of using a credit card is you're not only going to have a single source of transactions to keep track of ... but you're also building credit and, in many cases, earning rewards with those purchases," says Carl Thibodeau, senior vice president of consumer credit and debit card solutions at SunTrust Bank.
Use different credit cards for different budge categories. Or, you can use a different credit card for each major spending category you're trying to keep under control. It allows you to see a category-by-category comparison of how your balances compare with your budget.
This method can be particularly useful if you have a couple budget categories you have trouble managing. You could keep the other categories that you don't have problems with on a single card.
This method tends to work well for those who have good organizational systems in place. "It's fine as long as that's your personality and you like looking at five different statements every month," says Michael Foguth, founder of Foguth Financial Group, a Michigan-based advisory firm. It's not for everyone, though. "In my opinion, it's more confusing to juggle five things instead of one or two," he says. If following this strategy causes you to miss a card's statement and make a late payment, it may not be worthwhile.
Check balances regularly. A budget isn't something you set at the start of the month and can forget about. You need to stay on top of it. "You should be looking at your credit card statements at a minimum of once per week," Foguth says.
You don't have to wait for your statement to show up in your mailbox anymore. Technology makes checking your balances easier than ever before. Through a smartphone or on the issuer's website, you can access your credit card account transaction history. It's important to note that the balance it shows may not include your most recent transactions. Even so, it should still give you a good idea where you stand.
Set up balance alerts. You can program some credit card accounts to notify you when you hit a preset spending limit, Foguth says. If that's an option on your card, consider setting your limit for less than your targeted budget amount. If you get an alert when you've spent 75% of your budget, you have time to adjust how you spend for the remainder of the month.
Pay off credit card balances frequently. For some, budgeting is easier if you set weekly or biweekly, instead of monthly, targets. Credit cards make managing shorter-term budgets easy because you can make payments more frequently than once per month.
"If you get paid every two weeks, pay it off when you get your paycheck," says Foguth. If you find that you can't afford to pay the balance down to zero, you may be able to quickly adjust your spending before it gets out of control.
Use account locks or freezes. Some credit cards allow you to lock or freeze your credit card temporarily through the issuer's app or website. Though the feature is primarily designed to combat fraud when you think you've misplaced your card, you can also use it to keep yourself from spending after you've hit your self-imposed budget limit.
"I think it's a tactic that could potentially work. I think it comes down to the individual and the self-control they have to execute that," says Thibodeau. After all, if you really want something, it's just as easy to unlock the card as it is to lock it.
Request a smaller credit limit. One way to make sure you don't go over your budget is by requesting a smaller credit limit. If you do, make sure your credit card issuer doesn't allow you to exceed your credit limit. Some issuers allow it but may charge an over-the-limit fee if you opt in. Lowering your credit limit to match your budget gives you a mandatory cut-off point for your spending. Once you've reached your credit limit for the month, you can't spend any more.
But be aware that lowering your credit limit can be a problem for your credit score. Credit utilization -- how much of your available credit you're using -- is a major credit score factor, so having a lower credit limit and maxing it out each month can damage your credit score. To further complicate matters, you have to request a credit limit increase if your budget increases. Your request may get denied and may also result in a hard inquiry that could further damage your score.
Use a credit card that categorizes your spending automatically. Some credit cards break down your spending by category in online reports. This can help you see at a glance where you've spent your money each month -- without having to do the work, Foguth says.
But be careful when using this feature. Credit card issuers aren't perfect at categorizing expenses. Their expense categories may not match your personal budget. While you can buy clothing, pet food, groceries and tires at Walmart, your credit card company doesn't know you purchased potentially four different categories of items in a single transaction.
[Read: Best Low-Interest Credit Cards.]
Before You Start: Know Yourself and Your Habits
To successfully use credit cards as a budgeting tool, you must intimately know yourself and your money habits. "Some of the individuals that should think twice about using this method are those that don't have the ability to pay off the balance as the bill is due," Thibodeau says.
Carrying a balance can be costly, especially if your card has a high APR. If you know you can't handle the temptation of credit cards without overspending, you may be better suited to budgeting with cash or a debit card.
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