All the smart financial people tell you to “cut up your credit cards.” If I was so inclined, I’d even put some links here to prove it. Dave Ramsay for sure advocates this. Suze Orman probably does. Warren Buffett most likely says this, but easy for him to say, amirite, since he can buy the entire credit card company multiple times over.
Well, I’m here to tell you that credit cards are a boon to mankind. If I get a $100 atm, I will keep track of $57.00 of it and the rest will typically have to go under the “miscellaneous” category. If I use my credit card, I can account for every penny spent. If you look at the statistics, I think the credit card companies are probably making out better than the consumer (imagine if I had an actual statistic for you), but the point is, you can work the system.
Must-do #1 for Smart Credit Carding
Remember credit card companies are not your friend. They are not your enemy, but they are not your friend. Their business is making money, and money they do make. Balance transfer fees, cash advance fees, over-limit charges, interest, late fees — savvy business people, these companies. If you decide to call them and ask them to reverse a charge, or cut you some slack just this one time, remember that they may do so, but just as likely they won’t. If you are going to use a credit card, know their policies and follow them.
Must-do #2 for Smart Credit Carding
Utilize your smartphone. Most banks and credit card companies have apps. Use them! There are multiple budgeting apps (Mint is a good one). Wunderlist is a fantastic list-making app, which has revolutionized our family grocery shopping (an area we tend to overspend if not careful). We are able to share the list between multiple people so anyone can add or delete an item.
Must-do #3 for Smart Credit Carding
Understand the time frame your bank or credit card needs to process a payment, a charge, and a credit. This gap can make the difference between staying on budget and accidentally going over in your “hot” categories. My hot categories are groceries, restaurants, and entertainment. YMMV. Nothing more irritating than getting a late fee because you didn’t set up the payment long enough before the due date. Be aware when a credit is not going to appear until your next statement as that can impact your monthly payoff amount.
Must-do #4 for Smart Credit Carding
BE ON TIME. Plan ahead! Set a reminder on your phone calendar. Write it on a desk calendar. Set up auto-pay. Whatever it takes. Be consistently on time, as this is one of the best ways to demonstrate to yourself that you are managing your cards wisely and responsibly.
Must-do #5 for Smart Credit Carding
Absolutely, positively have a monthly spending plan that you create before the month begins and live by the entire month through. Do not use a credit card if you do not have a spending plan. A monthly spending plan should take into consideration all of your projected income, your fixed bills, your one-time bills, birthdays or special occasions, and any other spending you may need to do that month. Your spending plan must have zero as the bottom line. That is, you take your projected income, and identify where every single dollar is going to go, be it savings, retirement, debt reduction (for the days before you got it together), expenses, or identified spending money.
Must-do #6 for Smart Credit Carding.
Do not impulse buy anything over $6.34. That means no plane tickets, no fancy dress for the upcoming soiree, no new furniture marked down just for today. If you have plane tickets, fancy dress, or furniture in your spending plan, by all means, go for it. But NO impulse buying anything over $6.34. Also be aware if you are impulse buying multiple items under the $6.34 limit. Might need to lower the limit.
Must-do #7 for Smart Credit Carding
Keep things as simple as you can. Five different financial institutions (banks, credit unions, credit card companies) are going to be way harder to keep track of than one or two. If you currently have five or more, look at them and see if any can be eliminated. For every institution you do have, be absolutely clear on what your username and password is to simplify the process of paying a bill or checking a balance. I once broke up with Kohls’ because their online system was so difficult to use, but it really boiled down to my failure to be absolutely clear on what their policies were, and what my username and ever-changing password were.
Must-do #8 for Smart Credit Carding
Be accountable to someone. Your spouse, significant other, parent, child, friend, someone. It is the exact same principle that you learn about in AA. When you go off on your own and think you can handle the temptation of alcohol (or spending, in this case), you are putting yourself in danger. If you are not willing to truly be held accountable by someone else, do not use credit cards unless you have an established track record of paying your balance off every month.
Must-do #9 for Smart Credit Carding
Take the time you need to set up your system. Install your budgeting software and understand how to use it. Have your accounts registered online and know the logins, passwords, websites, and policies. Figure out your preferred method of keeping abreast of your spending and how your spending is coinciding with your plan. Excel (and Numbers, on Mac) are great programs for keeping track of your spending in your “hot” categories. There is simply nothing like knowing exactly what you are spending in a category that will help you stay on top of your spending plan, and your spending.
Must-do #10 for Smart Credit Carding
Always be ready to revise your plan to meet your current needs. Be aware of sound financial planning advice. Do build an emergency fund as soon as possible of $1000. (Dave Ramsey’s baby step #1) Be intentional about paying off any current debts. Save up for large purchases. Stay on top of your monthly plan and notice areas that need closer attention.
Credit cards can and do get people into debt. So, you have to go into using them with eyes WIDE open and enough humility to realize that it can happen to anyone. But, when you can use cards wisely and judiciously, you can realize some true benefits.
What other must-do’s do you have in place for using credit cards wisely?