This past January I opened my first credit card in two years. I love the idea of credit cards but I had to give it up. I was using it just irresponsibly enough to make a dent in my finances that I didn’t want. I never raked up credit card debt into the thousands the way some people do but I would throw it down a little too quickly at Target and bars. I was working as a waitress at the time and money was tight- the extra $50 spent at Target made a difference in my monthly budgeting.
I’ve noticed something about myself and credit cards. It’s not great but it’s also not incredibly surprising. I’m much more likely to spend more money if I use a credit card, as opposed to a debit card or cash. Like, a shocking amount more. Back when I did have a credit card I used to carry a small amount of debt month-to-month. I would pay the balance when I could, but sometimes I didn’t quite have the money. Of course, I know now that I was paying more by not paying. Credit card interest rates are insanely high! I am definitely going to teach my children about proper credit card use and get them started with a student credit card when they are in college. There are so many things to be aware of with credit cards and I think starting to build credit early on is really important. If you are looking to teach your student about proper credit card usage, I found this student credit card video course to be super helpful.
I’m very good at using my debit card. To me it’s exactly like using cash. I know I only have a certain amount to spend and I’m very protective of my bank account balance. When it comes to credit cards though, it’s a totally different ball game! I know that I have a full month to come up with the cash somehow. I also tell myself that I’m earning rewards points. Since I am planning on taking myself somewhere totally fabulous next fall and using rewards points to fund the plane ticket, I tell myself that spending NOW will come back to me THEN.
Now, before you go and think I’ve been a bad little personal finance blogger, I will have it known that I have managed to pay off my credit card in full every month since getting it. It was kind of a close call this month but I still managed it. So thus far, I have paid zero dollars in interest. Yay!
Still, I know that my mindset around my card could be better. I still have a habit of putting something on my card and not knowing exactly where the money to pay it off comes from. Since I have multiple streams of revenue I’ve gotten used to saying ‘Nonprofit goes towards loans. Catering goes towards rent. Coaching goes towards food.’ Now I have to find something to say goes towards my credit card. And while I am still in debt, sending money to a credit card company keeps me from sending money to my loans.
I know that I of course, do not HAVE to think like this. At the end of the month, no matter where it’s come from, I have earned a lump sum of cash. I don’t have to allocate quite so deliberately what goes where. But my larger point is that my credit card is leading to more spending than I’ve been doing for the last long while, especially since I got serious about paying off my debt. I’m nervous that I am not strong enough to really limit myself when it comes to credit purchases. I don’t want my credit card to wreck havoc on my spending habits.
Last month I was super grateful to have a credit card- I had to pay $500 worth of medical bills and didn’t have that amount in my checking account at the time. I was waiting on a few payments to come in. So having my credit card handy meant that I could pay on the spot and knowing the money was coming in meant that I was going to be able to pay it off. I earned some rewards points to boot!
Moving forward, I think what I need to do is set limits for myself. Maybe I’ll just use my card for groceries and gas. The double g’s! I am planning on putting my insurance payment of $412 on it in June. I pay by car insurance once every 6 months in two lumps sums. I prefer lump sums to monthly payments- makes it easier all around for me. Post June though, I feel that I am going to need a hard boundary for myself. Otherwise I could slip easily right into spending just a little extra here and there with the dang thing, until I’m looking at a monthly bill I can’t pay.
How do y’all use your credit cards? Any secret tips to help me stay on track?
Kara Perez is the original founder of From Frugal To Free. She is a money expert, speaker and founder of Bravely Go, a feminist financial education company. Her work has been featured on NPR, Business Insider, Forbes, and Elite Daily.