A simples guide to budgeting with a credit card

Paying with a credit card or loan can sometimes feel a bit like pretend money and it’s easy to go mad – it’s not like actual cash which when it’s gone; it’s gone. Plus, if your card offers rewards then you might feel compelled to spend more to get more. But ‘go mad’ and you’ll be hit with a hefty bill at the end of the month. So here’s how you can still reap the benefits whilst staying in budget.

Using your credit card

You can use your credit card however you want; some people only use them for big purchases or treats – like new furniture, clothes or at Christmas. Others, use their card for everyday bits and bobs like going food shopping or petrol. The point is, it really doesn’t matter what you use it for – it’s how you manage it that’s key.

The great thing about credit cards is that you can spread the cost of what you buy over time and used wisely, it means you can do this without paying interest. Some cards will also give you back cashback rewards which could see you a little bit richer every month. Other cards let you transfer a balance so that you can pay back what you already owe gradually on a lower interest rate saving you money! 

A simples guide to budgeting with a credit card

How to budget money with your credit card

Your monthly credit card statement can sometimes read like a rap sheet of shame – listing all your impromptu purchases and being a reminder of the things you bought but didn’t really need. Once you’ve got over any disappointment at your lack of self-control, that statement is actually as a really useful tool in being able to assess, budget and plan your spending.

With any sort of budget, you need to know how much you have to spend – so work out what your monthly income is. Grab your credit card last statement and start grouping your purchases – food, fuel, clothes, fun stuff. Tot up what you’re spending on each and deduct this from your total income.

If the number that’s left is in plus figures – good job – you’re living within your means. If it comes back as a minus number – well, then you should definitely pay attention. But either way, it’s always good to do a bit of housekeeping and cut back – what you save could be put towards a new car, an amazing holiday or simply some brand new shoes. 

setting limits on credit cards

There might be some items that you pay for on credit where you feel the cost is non-negotiable; things like car insurance or home insurance, even your mobile phone bill. But pretty much all of these essentials can be negotiated, you just need to comparethemarket for a better package. Then look at everything else – if you buy your lunch daily, could you cut this back and take a packed lunch to work.

Writing down your goals (like a holiday or new car) might sound twee, but don’t underestimate the incentive that it’ll have. Knowing what you’re saving for is a powerful motivator. 

Top tips for reducing your credit card debts

Budgeting needs you to be honest so that you can focus on what you need to do – ask yourself:

  • What expenses aren’t necessary and could I reduce?
  • Could I scale back my grocery bill a little bit each week?
  • Would I have enough money in an emergency such as if I needed a new boiler or car repairs?
  • Is my spending out of control?

After your soul searching, take these practical steps to ensure you don’t get caught out with excess credit card charges:

  • Always pay your credit card off in full to avoid paying interest (or at least pay of the minimum to avoid charges, you will still have to pay interest on the outstanding amount though) - or consider paying it earlier rather than later. 
  • If your existing credit card debt is higher than Everest, consider transferring your balance to an alternative card that’ll give you a better rate (or interest free for a period)
  • Stick to your credit limit (ideally just below) going over could mean you’re fined and it’ll look bad on your credit report
  • Check your statement on a regular basis to make sure you’re not near your limit and to check for fraud – set up online account management or download an app that’ll help you stay on top of your money
  • Don’t use your credit card to take cash out, you’ll be charged interest on it (even if you pay it off within the month)
  • If you’re going on holiday, use a credit card that won’t charge you for use abroad and always opt to pay bills in the local currency
  • If you no longer use a credit card then it might also be worth cancelling it - there's no point in having it hang around. 

Need a new credit card?

Don’t let your credit card run away with your money, you’re in charge of your spending. Your credit card should work for you and it should give you an incentive to use it – so if yours doesn’t – find one today that does and start comparing.

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