My Credit Card Is My Single Most Powerful Budgeting Tool

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Maybe the title of this post surprised you, as credit cards are often villified in the personal finance community. However, if you’re out of debt and you can manage credit without overspending, a credit card has more perks than pitfalls.

I have two main credit cards: gold American Express card, which costs $150 per year, and the no-fee MBNA cash-back rewards card.

American-Express-Gold-Cardmbna

I used to have the Platinum American Express card, but downgraded to the gold card when I went back to school. I really, really miss my platinum card and the airport lounges and my free car rental upgrades and my gift cards to Coach… sigh. Maybe next year I can get it back.

Whenever possible, I charge all purchases to my American Express gold card.

At stores that do not accept American Express, I pay with my Mastercard.

I have a third no-fee, no-useful-rewards Visa card that I’ve had since I was 18 that I don’t use but just keep buried in a drawer because I constantly go back and forth about cancelling it. On one hand, it has the longest history (nearly 11 years!) but on the other, it never gets used so maybe it’s credit history doesn’t matter. I keep it out of a mix of being to lazy to cancel combined with a sense of emergency preparedness that, if my wallet were to get stolen again, I would be able to access money while waiting for replacement credit and debit cards to come in.

How My Credit Card Helps Me Budget

1. My credit card statement lists my spending, down to every penny. As much as I like money, even I find it tedious to write down where my every cent goes. My credit card statement is a perfect record of where my money has gone. (note: it’s possible for your credit card to contain mistakes and erroneous charges, which is why it’s important to check it against your receipts. Because I manage my transactions manually in the budgeting software I use — Money 4 by Jumsoft — I look at my credit card statement online 1-2 times per week to make sure it matches my own records)

2. All my regular bills are charged to my credit card, reducing the number of due dates I have to remember from a half-dozen to just one. I don’t know or care when my credit card, Netflix, or cellphone bills come in — they are all automatically charged to my credit card and I know when my credit card bill comes due!

3. I rack up the rewards points like crazy! By making an effort to put all my spending on plastic, I spend over $1,000 on my credit cards every month. On the American Express this will translate to 1,000 Amex points, or the equivalent of $10 (a 1% return). Already this year I’ve used Amex points to pay for over $250 of hotel stays when I went out of town to attend weddings. I love how Amex let’s you select how many points you want to apply to recent travel purchases:

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 *Note: even thought the American Express is “my” card, I use the points for joint spending with my boyfriend, like these hotel stays. Both weddings we attended were for cousins of mine, so I felt like because I dragged him all the way to Edmonton for my family events, the least I could do was help with the costs of our hotel stays. It’s just another way we share money after our joint chequing and joint savings accounts.

The only reason my credit card works for me as a budgeting tool is because I never carry a balance.

I usually make payments against my credit card balance 2-3 times per month. I have to — it gives me anxiety whenever I see it creep over $700! I’ve finally developed that magic personal finance sixth sense where I can just feel when my balance is getting too high and I just pay it down. This is the best practice because I never pay interest on any of my purchases.

If you owe a balance on your credit cards, DO NOT USE THE CARDS JUST TO GET REWARDS. The rewards don’t negate what you pay in interest, so you’re still operating at a loss. Put the cards away, kill the debt, and when you’re down to zero wait a full month, and then you can start using the cards again.

My credit cards make managing my finances easier, but I know it’s not for everyone. Anyone else have a great rewards card or other credit card that helps them budget?

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About Author

Student debt killer, super saver, and stock market addict. BSc. in Chemistry from the University of Alberta, MBA in Finance from the University of Calgary. CEO x 2 and MOM x 1. Currently residing in Calgary, Alberta, Canada, but hooked on travelling.

24 Comments

  1. We use credit cards for just about everything. Most of our recurring bills are automatically paid by the credit cards every month so I just don’t have to think about it. There are a couple we keep open because of how long we’ve had them and we use them for a bill or two a month, but we’ve talked about getting rid of at least one just to simplify things. Everything gets paid off at least once a month and our two main cards get paid twice a month.

  2. I also use my credit card for almost all my purchases. I have a momentum visa and although it doesn’t have as many perks as the AmEx, it’s still cash back and I’ll take it. I like having a full list of transactions and it makes Mint (or whatever) really simple to track since most of the purchases are coming from one place. That said, I often use my pc debit card when I’m shopping for groceries since the points system is pretty great

  3. Yup, I’m with you here. I’ve been churning credit cards for rewards since 2006 and have taken many free or almost free trips to various places in the world because of it. I never would have been able to do that without the help of credit card rewards.

    I have the Amex Platinum right now like you did and before that I had the Amex Gold Rewards that you have now. I also have the MBNA Smart Cash and the MBNA Rewards World Elite (2% cash back on all purchase, no limits or spending categories).

    Doesn’t matter what I’m buying, down to the pack of gum or cup of tea at Tim’s … it all goes on the card.

  4. Because fiance travels abroad a lot for work, we got a Chase Sapphire Preferred Visa. There are no foreign transaction fees, which is a must, because that crap is annoying. We put all of his travel expenses on there for his work, and then fill out reimbursements (instead of using the company card). While this is more paperwork, I volunteered to do it because plane tickets, rental cars, and other travel expenses are rewarded at 2%, plus if you redeem the points for travel, you get like 20% more points. In the past year alone, I have used the rewards points to pay for a couple of friends’ plane tickets to my wedding, and paid for plane tickets to visit the UK and to come see you in Calgary. 🙂 Woot woot. Pretty sweet.

  5. I love that you also make credit card payments 2-3 times a month. I do the same thing and my partner thinks I’m crazy, but it gives me such high anxiety to see a high number there that it just feels good to chip away at it over the course of the month rather than suddenly make one high payment.

    Great post!

  6. CreditKarma tells me that I have an F on “Age of Credit History” since my average account age is under 2 years. So I told myself that I’m not allowed to apply for a new credit card until I could and keep my average age above 2 years. That’ll be in February.

    I must say that sometimes I love making things complicated, but I absolutely LOVE mostly only having one credit card now. I got that Barclaycard Arrival that everyone was talking about and it is amazing and totally worth the $89 annual fee to me. I love TripIt Pro, the 2.22% cashback on everything, no foreign transaction fees, the chip+PIN while traveling outside of the US, and the free FICO score. There are some minor annoyances with the card, but the simplicity of it is amazing.

    I never carry a balance, but I definitely let it build up more than I used to, since I have my credit cards on auto-pay on statement due date now. I get anxious if my credit card balance is higher than $2,800 and then I pay it off. That amount has slowly gotten higher over the years 😉 I especially love charging work expenses and getting the rewards!

  7. Yup! That’s how we budget/pay bills too – it’s awesome. Makes life so much easier and you can tell real fast if you’re on track or not for the month (by just logging into one account vs handfuls of them). You’re right that it SUCKS for those who aren’t good with money, but everyone reading your blog is probably perfect, right? 🙂

    • According to their site, the CIBC dividend cash Visa only offers 0.25% cash-back on your first $1,500 and only 0.5% on the next $1,500. You earn 1% cash-back on purchases after $3,000! Pretty steep price.

      If you spend $2,000/mo on your cards, the Amex would give you $240 cash-back (net $90 after the fee) and the CIBC dividend cash Visa would give you $75.

      • Why not just use the MBNA card for all purchases? It’s everything else rate is 1%. Or are the fringe benefits worth the $150 annual fee to you? Or does the 1% end up being a bit more valuable when you redeem it for travel?

        • The MBNA card has a limit for which you can earn cash-back of $1,400 per month, which I typically go over, necessitating the use of another card to continue to get rewards.

          The fringe benefits of the Amex are substantial, which I should have mentioned — namely car rental insurance (typically $25/day and I rent a car for about 2-3 days per month) and purchase insurance, warranty extensions, etc. Overall it’s a better card for its price than the MBNA one.

          • Canada’s credit cards suck 🙁 There aren’t many in the US with caps on the cashback that you can earn. That makes total sense then that you would have the two cards!

          • Yeah they do. They’re also all at 19% — I don’t even know where you get a card at an interest rate of 10% in Canada, I think they’re all 20%+ unless it’s a promotion.

            The cap on cash-back is new as of last year. It used to be unlimited but now it sucks.. it takes forever to get a cheque.

      • CIBC’s rates are based per year, though – not month.

        $2,000 per month is $24,000 per year:

        0.25% on the first $1,500 is $3.75
        0.50% on the next $1,500 is $7.50
        1.00% on the last $21,000 is $210.00

        So the CIBC card gives you $221.25. MUCH better than the net $90 Amex gives you.

  8. We have a Discover card we use for most of our purchases. The cash back rewards are awesome. We have accumulated $450 this year. Probably going to earn another $150 by the end of the year. Last year we accumulated $500 and used it to buy our fridge. I have another Visa, that’s mine, that I use for bigger one time purchases like car insurance payments. The reward structure is not as great though, but I’ve accumulated $150 cash back so far. Right now I’ve decided to not cash out my rewards until they amount until something big. Who knows we might use it to go on an epic vacation.

  9. The credit card method is how my husband and I pay for our purchases as well. We don’t really use it for tracking purposes though. Currently I am still tracking our credit card expenses by collating the receipts using an electronic spreadsheet. Since we’re on such a tight budget I feel better knowing the realtime figures without the waiting of charges to clear on the account.

  10. We use Capital One World MasterCard and throw every single purchase we can at that thing to gain points for travel. I like it because you do not have to spend it only on flights. You can use it on Flights, Hotels, Rental cars, anything related to travel. You get 2 points for every dollar you spend, with no maximums. We have not paid for a family vacation in three years since owning this card, and I already have $2000 worth of travel credits (200,000 points) ready to be redeemed again next time we want to take a vacation somewhere.

    The interest rate is 19.9% but we never carry a balance so they have never received any interest payments from us, but we have claimed more than $4000 worth of travel thanks to the points. I love this card!

  11. What Melanie said above – we also use the Capital 1 Aspire World Travel Mastercard and it is AMAZEBALLS.

    You’ve got in bang-on – why would you not use credit cards? Using cash for expenses sucks.

  12. After years of dealing with credit card debt, then being scared I’d rack it back up, I’m finally in the habit of paying for everything with my credit card; that probably deserves a post of its own sometime, haha. But my reasons for loving it are #2 and #3 on your list. I love not having to think about my bills (except 2 of them) and I’m earning a ridiculous amount of cash back. Good post, B!

  13. I love what you said, if you carry a balance then don’t use them for rewards. That is very true. I like using a credit card for these reasons as well. I spend the same no matter what with cash, credit, debit, whatever. I’ve never had a month where we didn’t pay it off.

  14. What about store cards that offer 5% or so off purchases such as Target, Lowes, and Home Depot?

  15. I do the EXACT same thing. The “only” debt I have is my car loan, which is held by the same bank with which I do my regular banking, so it’s auto-debited each month from my checking account, and my student loans, which, LE SIGH.

    I have a handful of cards but typically only use two. Currently, I charge all purchases made at a grocery store or gas station to my AMEX blue preferred, because I get 6% cash back on grocery purchases and 3% cash back on gas purchases. I’ve only had this card for about a month, but have already earned $20 in rewards – from just two or three grocery trips and weekly fill-ups.

    For everything else, I use my CapOne Visa, which gives me the normal 1% cash back. I also have a Chase United card, which earns me miles, but I recently stopped using it (after a year of regular use) because we don’t travel so it’s kind of pointless for me and I could use the cash back from my CapOne Visa more.

    In fact, last year we took a trip to the Bahamas and for the six months leading up to it I made sure to charge EVERYTHING I could to my CapOne Visa, to earn as much cash back as possible. By the time our trip came around, I have $800 of free spending money.

    BUT, like you said, I do this WITHOUT CARRYING A BALANCE. Ever. I use a Google spreadsheet that I created to basically serve as a checkbook register for my credit card. So every time I charge something to it I know exactly how much money I have remaining from my current paycheck. Unfortunately for my cash back rewards I can’t charge everything to credit cards (like rent (not for cheap (not here in the States))), so some stuff is paid directly from checking.

    Here’s my post about how I use my credit cards (and a link to my spreadsheet): http://www.kelseyespecially.com/2015/12/zero-sum-budgeting-free-2016-monthly-budgeting-spreadsheet-expense-tracker/