I talk (or write, if you prefer) a lot about rewards credit cards, and how I try to use them as much as possible, simply, because I like the rewards! But what I don’t talk much about is staying on a budget while using only those credit cards. Today that’ll change. Because that’s exactly what this post is about.
Benefits of credit cards
Using credit cards for most of your spending can be very beneficial. I’ve touched on it before. You can earn hundreds of dollars a year in points. And how can I forget about the sign-up bonuses? Most of the time just signing up for a good travel credit card can mean a free round trip flight, or a free night or two at a hotel.
Dangers of credit cards
Yes, credit cards can also be dangerous. The reason the rewards are so lucrative is because credit card companies make a lot of money on those who carry a debt. Right now, the average credit card debt per household is nearly $16,000! That’s the average!
Unfortunately, paying interest month-to-month diminishes the value of trying to earn travel rewards. Especially when you consider many of the rewards cards carry higher interest rates. Sometimes they can get as high as 24.99%.
That’s why those of us who are into this hobby need to figure out how much we can spend every month, without going into debt. AKA, a budget. That’s what I do. But it’s not always easy. Trust me on that. A budget can be annoying when you want to splurge on something but “can’t” because of your budget. With that said, here are some pointers that help me, and hopefully help you get out of debt, or stay out of debt so you can reap the benefits of credit card rewards:
Create a budget
Again, this is important. You need to figure out how much you can spend on a month-to-month basis. And there are several ways you can do that. One of my favorite budgets is a zero-sum budget. Also, something that helps me stay on budget is a free check balancing app that I downloaded to my phone. I recommend you do the same.
Don’t spend more than you can afford
This should be common sense, but it’s really not. Why do you think so many families are in debt? It’s because they think this: “...but my credit card has a $15,000 limit!” That kind of thinking is what gets people in trouble. I don’t know how else to say this: don’t spend more than you can afford! Otherwise you’ll end up being one of those families that is $16K in the hole.
Credit card spending is inherently hard to keep in check. It’s not all you. These credit card companies are around because they know most people will (at some point) spend more than they can afford. They are very practiced at separating you from your money. But if you use a little common sense you can use credit cards to your advantage.
You may also be interested in:
-How Many Points can you Earn in a Year?
-The VIP Perks you Didn't Know you had
-Will Credit Card Churning Hurt my Credit Score?