Money is one of the most important resources that is used by an individual in today’s time. They give us the power to purchase the goods and services that are required for the smooth functioning of an individual’s life. But there may sometimes arise such situations where an individual might run out of cash but still has to fulfill some basic necessities. This is where credit cards come into existence. Credit cards act as saviors in times of emergency.
They help us deal with situations that otherwise might seem difficult to be completed. Not only in tough situations, but credit cards also prove to be quite useful when you have to purchase something huge such as electronics because credit cards generally offer great deals while purchasing such products. Also, the amount of purchase can be easily converted into EMIs, and hence, we do not feel any burden in buying such products.
But because of this feature of credit cards, an individual leads to overspending using his credit card and start buying products that he actually does not need and are out of his purchasing power. You can take advantage of this feature if you are able to pay for these bills by the due date of the credit card but if you are unable to pay the bills in time, they will keep attracting the interest portion and the bill will keep piling up. This will in turn have a negative impact on your credit score. Hence, it is very important to use your credit cards in a proper manner. Just like any other budget, a credit card budget also needs to be intentionally developed so as to keep in sync with the other expenses as well. In this article, we will give you a few tips on which you can budget with your credit cards in a proper manner –
Track your spending
The most important aspect to have a budget with your credit cards is to track your spending. With the help of a credit card statement, you can now have knowledge of where you have spent using your credit card. Whether you have spent on any departmental store or on travel or for making any purchase, the history of all your transactions will be clearly mentioned in the credit card statement. You can use this statement to create a budget for your expenses. You can keep a check on where you are spending the most using your credit card and limit your spending if you consider them unnecessary.
Now, if you have created a budget for yourself, you have to take care that you use your credit card in such a way that you stay within your overall budget. With the help of a credit card statement, you can always stay updated about how much you have spent using your credit card and whether or not you are still under the spending limits.
Pay off your card balances
You should make sure to pay all your credit balances well in time as non-payment of the bill would attract high charges and your budget will be disturbed if you will have to pay some extra amount. Hence, to avoid such expenses, you should try to pay your credit card balance in full and before the due date. You should avoid carrying any balance to the next month as it will keep adding to your expenses because, then in the next month, you will have to pay for the outstanding balance of the previous month plus the interest charges applicable on it and the balance for the current month as well.
Use your rewards as a bonus
Whenever you use a credit card, you earn reward points or cashback on transactions made using the credit card. Hence, the reward points earned using the credit cards should not be treated as an income but should be saved for travel-related bookings or should be redeemed for cash in case of emergencies.
Low Credit limit
To avoid unnecessary expenses through your credit card, you should ask your credit card company to lower the credit limit of your credit card. This will be the best way if you need to have a cap on your monthly expenses and will help you to stay within your designated budget.
Set up balance alerts
Another effective method to keep your monthly expenses within the budget is to set up alerts on your credit card usage and regular balance checks. With this, you will start getting the balance alerts every time you spend using your credit card, and also you will be notified about the remaining credit limit as well. Not only after swiping, but you can also request to get balance alerts on daily basis or weekly or biweekly so that you have a clear knowledge of the limits available.
Also read: How To Check Credit Card Balance?
One card per category
If you have multiple credit cards and rewards on individual cards differ on the basis of where you spend your credit card, then you should have a dedicated card per category. You will have to set up a budget on individual credit cards to spend on a specific category. You have to make sure that to stay within budget, you do not overspend using any of your credit cards.
Having a healthy relationship with credit cards is very important. Overspending through credit cards or not paying your credit card bills in time can lead to big mismanagement of your budget. Setting up a budget is really important to keep all your finances in place. A budget keeps on changing with changes in income or expenses hence you should be adjusted your spending behavior on this basis. Also, credit cards if used in an inappropriate manner can mismanage your budget but if used in a wise manner, they can help you build a strong budget.