Home > Credit Cards > How to Live Within Your Means on Credit Cards

Comments 1 Comment

You’ve seen the warnings that consumers spend more when they use plastic as opposed to cash. But is it still possible to live within your means and still use credit cards?

“Absolutely,” says Mikelann Valterra, a money coach and founder of MoneyMinder online spending tracker. “If they track their (credit card) purchases in their financial tracking software on the day they make them, they will spend less money,” she says. Valterra says that recording purchases doesn’t just help consumers keep tabs on where their money is going. “It balances out the brain,” she says, referring to the flood of brain chemicals that occur when we buy something pleasurable.

Cambridge Credit Counseling has found that for those who enroll in a Debt Management Plan (DMP) to pay off their credit card balances, 89.3% of those who track their expenses find specific items in their budget that can be reduced.

Still, there is always the danger that credit cards make it too easy to overspend.

Some 19% of consumers spend more than they earn, and one in three say they don’t pay more than the minimum payments on their credit cards, according to FINRA’s National Financial Capability Study. That’s a lot of consumers who are not living within their means when it comes to using their credit cards.

Credit Cards After Debt, With a Caveat

After Carrie Rocha, founder of Pocket Your Dollars, and her husband dug their way out of $60,000 in credit card debt, they didn’t cut up their credit cards. They still use one for online purchases and travel.

But they are cautious. They’ve avoided the temptation of using their credit cards for pay for more things in order to earn rewards, for example.

Rocha says this is a very real problem, noting that people often really feel like they are losing out if they don’t use their credit cards to earn rewards. But for someone who doesn’t pay the balance off in full, trying to chase rewards is fruitless. “One month’s of interest wipes out that 1% reward,” she points out.

And although she views a credit card as simply a payment tool, she adds this caveat: “A credit card is to be used as a payment method of choice for certain purchases all of which should be planned for,” she says, emphasizing the words “planned for.”

Practical Tips for Credit Card Spending

Christopher Viale, president of Cambridge Credit Counseling Services, agrees. He recommends consumers avoid making credit card purchases they can’t pay off in full within a month or two unless it is an absolute emergency.

He provides another rule of thumb that can help maintain stronger credit: “If you’re using more than 30% of your credit limit, back off until your balance is comfortably under that mark, and make sure you pay your credit card bills on time every month to help build your credit score.”

Valterra also suggests changing your due date on your credit card to the last day of the month. That way, as long as you pay your bill in full, you will force yourself to to pay for purchases the same month you make them. “The billing cycle usually falls mid-month and that is really bad for people’s brains,” she says, referring to the fact that cardholders must budget to pay off a previous month’s purchases the following month.

Notice she says credit “card” and not “cards.” She encourages consumers to stick with one card to make it easier to get a handle on where their money is going.

The Quick Tips

  1. Record your purchases the same day you make them.
  2. Don’t fall into the trap of using credit cards just to earn rewards unless you can pay the balance off in full each month.
  3. Ask your card issuer to change your due date to the end of the month.
  4. Use one card so you can keep better track of your total spending.
  5. If you find yourself using more than 30% of the available credit on a particular card, stop using that card until your balance is paid down.

“The number one thing is to recognize that your credit card limit is not your means,” warns Rocha. “Your income is the cash money that people pay you. That is your means.”

Image: iStockphoto

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team