How to Spend Money Wisely » Credit Cards

Better Budgeting with a Credit Card

So far in my series of posts where I’ve been sharing my thoughts on The Capital One Mastercard, Exclusively for Costco, I’ve discussed how to choose a rewards credit card so that you get rewarded for money you’re spending already. But something not often touched on with credit cards is how you can use them to help you create a budget and track your spending.

The Importance of Budgeting

Budgeting is important because it helps you ensure all bills are covered and sets limits on your spending, all within the amount of income you bring in. To improve your financial situation, you have to increase your cash flow by spending less than you make.

To budget properly, you need to know where you’re spending your money. This isn’t so easy if you spend mostly cash, though it can be done if you keep a notebook on you or save all receipts.

How to Plan a Budget and Benefit from Rewards

Using a credit card can help you keep track of your spending so that you have a meaningful budget that you can stick to. If you put all your spending on one card, then the statement becomes your monthly spending report. And likely all cards now allow you to login online to review your spending every day. Then, every month, you simply use your paycheque to pay the credit card bill.

But if you’re doing all your spending on a rewards card, not only can you track your spending, but you’ll also be earning towards a nice cash back reward at the end of the year. This payment can help fund an annual budget goal like saving into an RRSP or TFSA.

How You Can Use Your Credit Card to Reduce Your Budget

I use a credit card for all my purchases and it also helps me stay within budget since I get cash back rewards on my purchases.

If you are shopping at Costco quite a bit like I do, reduce your spending budget for the year even more by getting Costco’s Executive Membership and receive another 2% annual rebate on most of your Costco purchases.

A credit card is a tool in your personal finance toolbox. Helping you create a budget and earning rewards are just a couple examples of the benefits when you use it responsibly!

Comments

  1. Jon C

    This is exactly what we do in our house too. I actually started with just a $500 limit on my credit card, so it was very easy to track how much my expenses were. I would have to pay off my credit card several times a month, but because it came out of checking account it made it much easier to see exactly how much money I had left. That’s how I used my credit card responsibly!

  2. Good tips! We have a Discover Card with Sam’s club that pays 3% back on purchases there & 1% back everywhere else. Every bit helps!

  3. My Own Advisor

    Good tips Tom! Will include this one in my Weekend Reading edition later this week!

    Cheers,
    Mark

  4. Barb Friedberg

    I’ve been using my visa card for years and buy gift cards with the rewards for free gas and shopping at amazon. Works for us!!

  5. KC @ PsychoMoney

    We do this in our house as well. I spend less for sure when using a credit card. For some reason when I carry cash it all vanishes on things, but when I used credit cards I am less likely to pull it out, especially on little things.

  6. Jenn

    Our mortgage, property taxes and hydro bill seem to be the only things we can’t put on the credit card. Unfortunate since those are three big items. Everything else goes on our Aeroplan Visa – utilities, insurance, gas, groceries, bus passes, home/car repairs, etc. Then I pay if off every Friday. I look at it not as a credit card, but rather a debit card that just takes a few days to pull the money from the account rather than a few seconds. We live pretty frugally and many weeks the only spending is gas and groceries. Even so, by running absolutely everything through the card, our family of 4 flies to Europe every other year free on the points earned for doing what we would have done anyway.
    PS. you can’t use Visa at Tim Horton’s (and it might seem silly for a $1.60 coffee) but you can set up your Tim card to automatically reload from your Visa. I don’t spend a lot on coffee, but this way I get my Aeroplan points.

  7. JG Larvan

    Good tips. Credit cards can be your saving tool or it can destroy you depending on how you handle it. As long as you stay on your budget and pay off everything at the end of the month, it should help you save money and get you some perks, too.

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