5 tips on keeping your credit card spending under control

Quick insights

• You can track your credit card spending by using different banking apps, spreadsheets and budgeting tools to stay up to date with your finances.
• When using your credit card, try to keep your credit utilization rate under 30% to maintain a good credit score.
• Strategically use your credit card for routine and one-off, big-ticket purchases to take advantage of rewards programs.

It can sometimes be easy to overspend when using a credit card compared to making purchases with cash. With the right approach, credit cards can be a tool to help you budget properly. It might be important for you to use your credit card wisely because credit history can impact the ability to get approved for loans and mortgages and reduce interest payments over the life of the loan.

Track your credit card spending

There are many banking and budgeting apps you can download to your smartphone or tablet to help you with tracking credit card purchases. Many banks and credit card issuers provide full visibility into customer transactions via an online portal or their own app (such as Chase). You can often use these tools to help you better understand your spending habits and categorize your purchases under different buckets such as essential and non-essential expenses.

If you prefer to use a spreadsheet, prepare in advance by gathering all the necessary documents to get an accurate view of your finances. This can help make it easier to designate your fixed bills, subscriptions and miscellaneous expenses into various categories so you can track overall spending.

Set a manageable goal

Using a credit card might help you achieve your financial and personal goals. There are multiple ways that could help you better manage your finances such as:

• Reviewing your credit card statement to create an effective budget
• Boosting your credit card rewards earnings
• Carefully aligning upcoming big-ticket purchases with promotional welcome bonus offers

By reviewing your monthly statement and practicing good recordkeeping habits, credit cards can make it easier to create a more accurate budget. With your newly improved budget tracker, you might be able to reach your monthly savings goals faster and reduce some unnecessary spending.

Credit Card Rewards and Responsible Spending

Once you have an idea of your expenses, you can use credit card to earn points. However, it may be a good idea to use your credit card wisely as a tool to improve your credit and maximize rewards. If you intend on using your credit card to make routine purchases, set a budget and practice responsible spending.

If you have a large purchase coming up, you may want to consider opening up a new credit card that offers a welcome bonus. With welcome bonus offers, eligibility is typically based on spending a certain amount of money within the first few months of opening the account. However, you might want to only use this approach if you have the money already saved in a financial account or have an alternative way to pay off your debt as soon as possible.

Tackling credit card debt

If you’re someone with existing debt, it's crucial to set a goal to tackle your credit card debt. The four most well-known approaches to help you reduce consumer debt include:

• Debt Snowball Method – Pay off the smallest debt balance first, then moving to the next smallest
• Avalanche Method – Pay off the loans with the highest interest rates first, then focus on the next high-interest rate loan
• Balance transfer – This approach involves transferring existing debt from one credit card to another. You may have the luxury of a low or zero percent APR for a limited time. Please note that balance transfers are typically accompanied by fees that range from 3% to 5%.
• Debt consolidation – This approach involves combining multiple high-interest debts into a new loan or credit card with a single monthly payment.

Keep your credit utilization low

Credit utilization is an important data point used to determine your credit score and plays a role in maintaining a strong credit profile. Credit utilization is the percentage of credit you are currently using compared to the total available credit. A good rule of thumb is to keep your credit utilization rate under 30%.

• Example: If your credit card has a $1,500 limit, your outstanding balance should not exceed $450 which is a 30% credit utilization rate. Occasionally, there may be a big-ticket item – such as a vacation – that exceeds 30% of your available credit. In this case, your goal might be to pay it off before you start to incur interest.

There are several ways to lower your credit utilization rate including paying off remaining debt balances and requesting a higher credit limit. Getting a credit limit increase gives you more spending power and may improve your credit utilization ratio.

Set up account alerts for daily balance and payment reminders

It’s a great idea to set up account alerts to stay on top of your finances. There are various alerts you can set up on your mobile device including daily balance alerts, unusual account activity alerts and more. Some benefits to setting up account alerts are as follows:

• Get ahead of potential problems
• Peace of mind
• Real-time notifications to keep you in the loop
• Convenience

Setting up alerts could make it easier to know where your bank account stands, so you can monitor your accounts and transactions and identify possible unauthorized purchases.

Only use your credit card on certain purchases

Credit cards may offer many benefits to cardholders; however, it’s a good idea to use them wisely on all purchases. You can use your credit card on everyday purchases such as groceries, online shopping and small household items. By using your credit card responsibly, you can help build up your credit history and improve your budgeting skills.

It’s best to limit the amount of large purchases you put on your credit card to keep your debt and credit utilization low. When you charge expensive items on your card, try to make payments on time and in full every month – at the very least try to pay the monthly minimum (and more if possible). Larger purchases include things such as household appliances or booking higher-ticketed travel accommodations.

Credit cardholders can look into rewards programs and perks such as cash back on purchases, premier travel and fine dining experiences, exclusive access to events and more.

In conclusion

When used strategically and responsibly, credit cards can be an important (and convenient) financial resource to help you track spending and accumulate rewards. However, it’s critical to keep your spending under control and minimize impulse purchases. By practicing simple budgeting tips, you will become a better manager of money and be well on your way to achieving your financial goals.