Credit cards, while useful, are often abused. Keeping a few simple tips in mind can help you become a responsible credit card user.
We all use credit cards for convenience. Their use has become a normal part of everyday life. We use them to leave a deposit, to book flights with airlines, and to obtain cash in a hurry. Along with their convenience, credit cards can also be a temptation for us to overspend. Following are some steps you can take to fight the urge to splurge on credit cards.
Make it personal, make it painful. Know your credit card balances and interest rates. By keeping track of what that shopping spree will cost you, you are more likely to think twice about charging it. Reward yourself when you use your credit cards appropriately. Deny yourself discretionary expenditures for a period of say six months when you use your credit card for impulse purchases. The punishment of having to go six months without shopping will be painful and you will be more likely to avoid that reoccurrence in the future.
Don’t carry the cards with you. Sometime the most effective way to resist the urge is to not bring the credit cards with you in the first place. It sounds simple but most people carry their credit cards in their purse or wallet out of habit. Some people even claim to feel “naked” without having their credit cards with them for emergencies. If it’s an emergency that concerns you, a cash emergency fund may be a better answer. There are few real emergencies that can’t be handled, at least initially, without a credit card.
Operate on a cash basis only. Try to operate strictly on a cash basis. Don’t use credit cards to make purchases or pay bills. Most bills can now be paid online via an electronic funds transfer from your checking account. By keeping credit cards out of the picture you begin to form a new habit of not using them and therefore decrease your chances of overspending with them. Operating on a cash basis makes you accountable for your cash flow on a daily basis.
Set a spending limit for the month. If you must use your credit cards consider setting a spending limit for the month. If you use a computer program like Microsoft Money or Quicken to keep track of your money you can set a spending limit for your credit card that is tied to your monthly budget. The computer program will alert you as you approach or exceed that limit for the month.
Limit the amount of credit card accounts you have open. Most financial experts agree that you really only need one or two open credit card accounts. If they are Visa or MasterCard accounts they can take the place of any gas or department store account and will probably have a lower interest rate. Shop around and find the best card for your needs. Rates, rewards, and fees vary greatly.
Finally, controlling the urge to splurge is ultimately a decision to act responsibly with your hard earned money. The reward of disciplined spending is peace of mind and possibly financial freedom. Why not take that first step today.