Credit card companies are offering more and more rewards, but that doesn’t mean you should spend recklessly. Just because you have a credit card with a huge limit doesn’t mean that your spending has no limits. In fact, there are some rules of thumb—and tools—that can help you make sure your spending is in line with your budget.
How to use a credit card responsibly? Let’s find the answers below:
Keep track of your limit
As a credit card holder, it’s important to keep track of your limit. That way, you can avoid spending more than you can afford to pay back. To do this:
- Check the minimum payment due each month. This will let you know what portion of your balance has been financed by interest and how much is actually being used for purchases. If the amount looks too large, ask if there’s a lower rate available or if there are any other ways that interest could be reduced.
- Know how much money is owed on an existing purchase before making another one with that same card (don’t let yourself get carried away). If nothing else, just knowing this information should serve as an incentive not to overspend!
Keep track of what you spend
The first step in spending wisely with a credit card is to keep track of what you spend. The easiest way to do this is via a budgeting app, like Mint or You Need A Budget (YNAB).
You can surely use your credit card statement as a record of all transactions, though it’s not quite as convenient. You can set up alerts on your phone to remind you when bills are due, which can be helpful if it’s been a while since the last time you checked in with your balance.
Another option is to keep a record of all transactions in a spreadsheet or other type of data file—just be sure that whatever method you choose for keeping track allows for easy categorization and analysis so that it will be useful later on!
Set up budget alerts
You should also set up alerts to keep you on track. According to SoFi professionals, “To avoid missing payments or making them late, consider signing up for an automatic payment plan with the credit card company,” which links directly to your bank account.
This feature will send you a notification when you are getting close to your limit and repeat it as soon as you have hit it. It will also send notifications when charges are made that take you over the limit and when fees are due.
Pay attention to fees and interest
When it comes to credit cards, the golden rule is: Don’t spend more than you can afford. But if you think about it, what does that really mean? It’s not just about charging something and paying for it later—it’s also about how much interest you’ll pay on what you charged and whether or not there are any fees associated with using that card.
The bottom line is that there are many things to consider when it comes to using your credit card. It’s crucial that you keep track of what you’re spending and how much you have left on your limit so that you don’t pay excessive fees or interest charges after each purchase.