Four Budget-Friendly Tips for Using a Credit Card (without going into debt)


4 budget-friendly tips for using a credit card

I know I've had a resurgence of budgeting posts lately, but after four years, I had started taking our budget for granted. Now that we're needing to buy a bunch of stuff for the house and baby, I freak out about how we're going to afford things on nearly a daily basis. Okay that was a lie. I freak out about it on a daily basis.
However, I have to remind myself that if nothing else, I am really grateful for the foundation we've laid and the budget we have in place that will (in theory) help us continue to track spending and keep us from going into debt.

Today I want to talk about credit cards and share what we do. When it comes to the idea of using credit cards, there seem to be two extremes. I’m totally overgeneralizing here, but just go with me.
  1. People who grew up hearing that credit cards were the devil and a pathway straight to debt hell. These people have never used a credit card, never owned a credit card, and most likely paid cash for everything.
  2. People who use credit cards to buy any and everything, even if they can’t afford it. These people have credit card bills ranking in the thousands, possibly on multiple cards. They do not keep track of their spending and in general do not think of credit card money as real money.
Then there is a third camp that falls somewhere in the middle of no credit at all and credit card bills for years to come. Jordan and I fall in this category. We budget and believe in a debt-free lifestyle, but we also have a credit card that we use daily on nearly all of our purchases. Credit cards don’t have to be a bad thing!

Personally, I see way more benefit to having a credit card than not having one if (and admittedly this is a large if) you can be disciplined about it. I’m not going to give you a list of reasons why you should get a credit card. Google that if you want to know. It’s been written.

In this post, I just want to quickly share with you four tips that will help you to use a credit card wisely while getting the most out of it.

Tip #1: Have one credit card that gives you rewards points or cashback and put all your purchases on it.

I know there are airline mileage cards and Kohl’s cards and such, but having too many cards can get really overwhelming. Plus, who wants to get that many bills? The bonus to having only one credit card is that you are getting the most for your rewards points. Choose a card that gives you a percentage of cash back for every purchase (most cards offer something, whether it’s 1%, 2%, etc.) and rack that cash up! 

We have Discover, and really like it.* We get 1% cash back on every single purchase, and there are rotating categories throughout the year where we get 5% back. Over the past two years, we have gotten almost $900 in cashback bonus money!

Our Discover money also works on Amazon, so when we check out, we have the option to use our cashback money to buy our item $1 for $1, which makes it completely free! If you don’t have a credit card, you’re missing out on the opportunity to get points or cash for purchases you’re making anyway. Trust me: that 1% doesn’t sound like a lot, but it adds up.

*Note: this is not a sponsored post; I’m just telling you what card we use. HOWEVER, if you are not a current Discover card member and want to be one, use my referral link and get $50 cashback bonus after your first purchase! 

Tip #2: Continue to log receipts and keep a budget worksheet as normal.

I think the biggest reason people get into trouble with credit cards is because they don’t see their spending as real money. If all you do is slide a card or punch in a number, you don’t see the cash exchange hands and thus don’t feel like you’re actually spending money. It can be easy to rack up your credit card statement and get blindsided at the end of the month with a giant bill if you aren’t paying attention.

The key to using a credit card is to pay attention. 

If you never stop logging receipts on your budgeting worksheet, you will never be able to forget that you are in fact spending actual money. Don’t look at your bank account and think, “Gosh, I have a lot of money in there. I can spend more!” 

Look at your account as if the purchases you put on your credit card have already been debited.

Tip #3: Don’t buy anything you can’t afford.

This one is obvious but seriously, just don’t buy something if you don’t have the money for it. Just because your credit card has a $3,000 limit does not mean you have $3,000! Save as usual, and when you have enough money in your account, go buy the item!

Now, obviously we’re not talking about giant emergencies that do sometimes happen in real life. Dave Ramsey tells you to keep $1,000 in cash handy for an emergency, which is a good tip, but sometimes a real emergency is more than that. So we’re not talking about that, okay? We’re talking about wants vs. needs. If you only have $500, don’t max out your credit card buying a $3,000 lawn mower. Again, pretend the money in your account is being debited every time you use your credit card.

Tip #4: Pay off your credit card bill in full every month.

Again, sometimes this is not possible (read: actual giant emergencies). But Jordan and I have been using our credit card for over four years and have paid our statement in full every single month. When you do this, you are sticking it to the credit card companies that make billions in interest payments from customers! 

By paying off our statement, we get our cash back from purchases we would have made anyway, and we make money off our credit card company. We’re pretty sure Discover hates us, and I’m okay with it.

So there you go! 

Just a few simple tips for wisely having and using a credit card. Like I said, we love Dave Ramsey’s steps and living a debt-free life (other than a mortgage), but we do not think having a credit card is a bad thing! You can actually use it to your advantage and make a few dollars along the way. Stick it to The Man!

Bonus Tip #5: Pay bills with your credit card.

This last tip is just for fun… pay bills with your credit card! A lot of companies want a bank draft, so not all companies will let you do this, but if you can, get on it! Remember that cash back I talked about? Those rewards points? The more bills you are able to pay using your credit card, the more you can pay yourself back with those rewards. You’re welcome.

Questions? Leave them in the comments or shoot me an email!

Do you have a credit card? Do you have any other tips to add for using them wisely and getting the most out of your rewards? What credit card have you found that offers the best rewards?

*For more budgeting posts, click here.*
Bailie @ The Hemborg Wife said...

Once we move this is exactly what I want to do as I love the idea of all spending coming from one area and then getting money! I keep telling my grandma to get one with miles so she can use them to visit me but she has an Old Navy one she loves since she uses the Old Navy money to buy gifts for all the grandkids!

Sara Oss said...

Best is generally subjective, but the Amazon card is amazing if you're a student and can use it for textbooks. It's very good even if you aren't one and can treat Amazon as a Target replacement.

We have two credit cards, one of which has a very low limit that we use if we're purchasing from an unfamiliar online site and that we carry with us on a daily basis. It would cause relatively few headaches if it were ever lifted or stolen because we could easily pay it off and close it. The other card stays at home unless we're going out intending to buy something. And it's not really a tip, but I don't know whether its common knowledge that you can call and have a bank lower your credit limit if it's more than you're comfortable with.

Ashley said...

I don't have a credit card yet, but I do plan on getting one when I get out of college and get a real job. Lol. I'm not sure babysitting actually counts as a job...
I really don't think you're overgeneralizing all that much with the 2 camps of people. At least that seems to be how it is as far as I can tell. I know maybe 3 people who don't fall into one of those categories.
These are all great tips. Especially the one about not buying it if you can't afford it. A credit card should be something for convenience... kind of like a debit card.
My uncle always tells me this: Credits cards are a good thing if you know how to handle them, but if you ever miss a payment, you either need to lock it up until you've paid off the balance or cut it up if you don't think you can resist spending more.

Cassie Lee @ Sage the Blog said...

We use the Chase Sapphire and LOVE it but I think we could definitely be using some of these tools to get the most out of it! Thanks for the tips! Pinned :)

Beka @ Sunshine to the Square Inch said...

Yes to Discover!!! We have that and love it!!! I still pay my monthly phone bill form the States right now through them so technically I'm still making cash on them. Also, we pay our bills through Discover when we can too.

The only down side to Discover is it doesn't work internationally.

One thing that would be helpful with credit cards and spending tracking is the new app Dave Ramsey has. It is basically the envelope system on-line. That way you could still budget, track your spending and you wouldn't rack up a credit card bill.

I also think one to two cards is best. Did you know that for each new credit card you apply for it lowers your overall credit score by a point or two?

Tracy said...

We are big believers and charging everything and paying it off at the end of the month. I've been able to rack up enough points to pay for an entire Disney World Vacation (that did take a few years of saving them up), helicopter rides when we were in Hawaii and Alaska. Now I'm saving them up to buy a new bed.

Ali said...

I love reward points! While we don't put everything on our CC, we do have kind of a happy medium of spending with the CC and our bank account. I pay things off right away, or as soon as possible when I use the credit card. It helps me not go overboard with the CC spending, because I will admit that I sometimes think "oh, well I can just pay that off next month!" I'm not perfect :o)

Amy said...

i wish the entire world would just follow Tip #3!
i want to ram my head against at all when people buy a huge flat screen then make the minimum payment and end up paying for 3 tvs when it's all said and done!
Also...i totally need to get the right kind of credit card. the one i have no is not building rewards (and i need hotel/air fare rewards like woah!)

Amy said...

aka ^ what are you suggestions? any (for the credit card haha)

Caroline @ In Due Time said...

yes yes! A topic I'm so passionate about!!!! Being debt free!

I always try to tell people that we NEVER pay for flights! It boggles my mind that people don't find credit cards that give them GOOD rewards like free flights or hotels! Great post as this will help SO many!

Rebecca Jo said...

I hate credit cards because of the ability of going into debt... BUT I love my credit card because I have it set to automatically get deducted from my bank account at the end of each month - so its like a debit card. No debt for me thankyouverymuch ... but I do need to keep more track of receipts. I usually just open my statement with one eye closed.

Sarah @ Sometimes Photojenik said...

I couldn't agree more with all your tips! Being responsible and paying attention is a big if for sure so sometimes I tell people to go the no credit card route until they have the hang of their budget and can exercise self control. We're big on points cards so that we can get free flights for vacation. Rewards cards are how my family traveled a lot even though we were on a single income and a tight budget. Great tips!

Maria said...

Yes to all the above! My husband and I have been doing this for years. I don't even know the pin to my debit card anymore (umm, I probably should, huh?). We both carry a Chase Freedom card that is similar to your Disover; 1% cash back for all items and 5% on select categories. I ONLY use this card when I'm buying something from those 5% categories. For instance, this month I'm only using my Chase card for gas, since it's 5% cash back. For all other purchases, I use the Citi Double Cash Mastercard, which is 2% back on everything. I also have a Virgin America airline card that I use for those flights and travel since we take them most often, but that one isn't that great, so I might cancel before the $50 annual fee. I have all my cards set up to automatically pay in full each month, so it's just like clockwork.

I grew up in the "credit cards are evil" camp and my aunt and uncle have never had a credit card in their name, ever or ever had a line of credit. They essentially have zero credit and pay for EVERYTHING (even their new house) with cash. They don't buy something until they have the money saved up for it. I find it fascinating how they've managed to live like that. They aren't rich by many standards (they live a super simple life on their farm, growing their own food and such), but they are such good savers that they've never had to use credit for anything.

Personal finance and investing is our hobby, so I could talk about it forever, but I'll stop now. :) I've never followed Ramsey, but my husband and I try to adhere to a lot of the Mr. Money Mustache principles of retiring early. He's pretty brutal, but definitely check him out.

sarah e said...

My hubs and I follow most of these tips. He was raised to be very frugal and careful with money (Mennonite background) and it is certainly paying off. We are real sticklers for paying the cards off at the end of every month. I was recently talking to a coworker who suggested that I just go purchase an item I've been wanting and to use the store's payment plan option. I responded with a Dave Ramsey rule "If you can't afford it now, you don't need it now." She laughed and said that maybe she should think of that next time so she'd spend less. As for me, I'm glad we think first then buy later. Great tips!

Amy @ A Desert Girl said...

Paying it off in full each month is key. I am horrified when I think of how much credit card companies make on interest that they collect from people who carry balances over AND how much extra people wind up paying over the cost of whatever it is they bought.

My mom is obsessed with Dave Ramsey.

Unknown said...

We have a credit card that we use to earn miles and pay off every month. We were able to fly to Alaska for $20 in June with those miles. #totallyworthit Since all our family lives out of state (read not Oklahoma) we need to be able to fly on the cheap. Hence the airline credit card.

Robyn B said...

that is very interesting. honestly, i've just never thought about credit cards - i don't know why... just haven't! but that's a great idea to use it for everything & take advantage of the rewards - using it for what you already spend anyways! :)

Carolann said...

I just have to tell you that I love all of your posts on budgeting. I think I have gone through your archives and read every single one! I've been married for two years and sharing a budget with someone has definitely been an adjustment. So far, we have been pretty good, but all of your tips are really helpful. We get cash back on our credit card and that recently paid for one of my trips home from Hawaii to New York to see my family! I was so happy!

Kristen @ See You In A Porridge said...

i am definitely #2.. not good, at all. KC is #1. so, together we find a nice balance. meaning we have credit cards we use for everything and he makes sure i don't go crazy and buy all the things. our number one rule is we absolutely do not get to buy it on the credit card unless the money is in the bank. we don't pay have to pay it immediately, but it stops us from buying big things we don't have the money for, if that makes sense. and i still track every dollar because it adds up fast!

The Girl who Loved to Write said...

Yes! I grew up thinking that credit cards were just a bad way of managing your money, and then when I turned 18 I had no credit whatsoever. It's so good to build credit--I just pretend it's a bank card. If I don't have enough in my bank account to pay it off, it can't go on the credit card. Simple!

Jenn @ Optimization Actually said...

This is typically what Ryan and I do. We use our credit cards for everything, but it's rare that we can't pay one off that month, and that means recalibrating and cutting back on spending the next month. I should probably actually track my spending to make sure this doesn't happen, but so far it's never really been a problem (and it's so easy to check both the credit balance and my bank account on my phone that there's no excuse for not knowing what's going on with those accounts). I can see why people are afraid of credit cards, and I've made my fair share of mistakes, but it's very difficult to get by without them in this day and age.

Candace Shiflet said...

Love these tips! I totally agree with everything! Especially not spending what you don't have as often as possible! Obviously things like a house and car do require you to spend more than what you have, but just being smart and making a budget can make it work out without ruining your credit and going into debt. I have a couple cards in my name (I heard it's good to have at least 3 lines of credit) and I am always super careful what I spend them on and careful to pay it off asap! I wish more people could see this post! I know too many people who just use their card and don't even thing about it. It's kinda nuts to me!
xo, Candace | Lovely Little Rants

Kerry @ Till Then Smile Often said...

Number 5 is genius. I think not buying things you can't afford is so smart. I got into trouble in college and worked hard to get out of that mess. It is so important to pay attention to your spending.

Rach said...

Yes! We are totally in the same boat as you guys! Our Italy trip cost us half as much as it could have because of credit card points (airline miles). And we're in the midst of racking up miles for our next trip coming up. It really is SO vital, though, to pay the cards off every month. I know you said that up there and I can't agree with you more. Credit cards can be great if used responsibly.

Laura Darling said...

These are great tips. We've gone back and forth on not using credit cards at all, and using them to get the points and just paying off in full every month. There are definitely some benefits to that!

The Lady Okie said...

We've loved it lately because we've been buying a lot of baby stuff with our points, so it's like getting stuff for free! But I definitely can see how they could be dangerous if you aren't paying attention.

The Lady Okie said...

Yes! Cash back is the best. It's money you're spending anyway. We've been buying baby stuff (like a crib mattress!) using our money, and it's awesome because it's free! Glad you like the posts and that they're helpful to you :) I do like writing about it and also hearing what others have to say. It's helpful and nice to know we're not the only people on a budget. Sometimes it feels that way....

The Lady Okie said...

That's actually a really good idea to use a card that gets you 2% cashback all the time and use the 5% for just that category. I've never thought of that! I might need to look into that. Not right now, though, because we have a lot of stuff to keep track of already, but seriously that is smart! 1% adds up even though it doesn't sound like much.

I've never heard of Mr. Money Mustache. I'll have to check him out!

The Lady Okie said...

That's a good tip about lowering your credit limit. I think that might be a good idea for people who can easily get carried away. And I like the idea of having a card you carry out with you that has a lower limit just in case it gets stolen. I've never heard of that! It's smart.

I didn't know Amazon had a card! Or maybe I did but I just ignore that part at checkout... I like being able to use our Discover points on Amazon. We've been buying a ton of baby stuff for free lately (a crib mattress!) which has been really nice.

The Lady Okie said...

Oh my gosh! You NEED to get a card that will give you rewards points! It's basically free money!
For hotel/airfare, I'm not the best one to ask. But if there's a specific airline you usually/like to travel, you might think about getting their cc. Southwest sends me credit card info ALL the time. I've also heard that places like Mariott have a card? Maybe I made that up. But you might look into it!

Robyn B said...

so i've never had a credit card but wanted to build my credit some... and i remembered that you did a post about your credit card... so i found it and used your referral link. i hope that gives you something extra on your account to! thanks for the link! :)