We recently discussed 10 credit card tips so you can benefit from credit card reward points without suffering from the penalties.
Today, we’ll look at one of the other major benefits to using credit cards: the ability to easily track your monthly spending.
This one perk can make staying on budget and fueling your Later Money bucket that much easier each month.
When you consistently fuel your Later Money bucket, you’re moving closer and closer to financial freedom.
Let’s take a closer look at how you can use credit cards as part of a healthy financial life.
How to use credit cards to track your spending.
Tracking your spending is a crucial first step in the budgeting process. But, that doesn’t mean that anybody actually likes doing it.
The good news is that once you have created a Budget After Thinking and developed consistent habits, you no longer need to track every penny.
Instead, you can track two simple numbers to stay on budget.
Credit cards make it very easy to track these two numbers.
Here’s exactly how I use credit cards to track my spending.
When I get my monthly statement for each credit card, the first thing I do I add the amount and due date to my Notes app.
I’ve been doing this for years now, which means I have a clear understanding of my family’s usual spending habits.
I can then quickly assess whether it was a good spending month. For example, if I normally spend $4,000 per month on my card, and this month I spent $5,000, I’ll know very quickly that something is off.
Sometimes, it’s obvious why I overspent. Maybe it was something like buying airplane tickets for a family vacation. If that’s the case, I don’t need to study my credit card statement too closely because I already know why my spending was more than usual.
Other times, it’s not so obvious. When I don’t immediately understand why my spending was higher than normal, I take a closer look at my statement.
In just a few minutes, I can look at an entire month’s worth of spending to determine where my money went so I can make thoughtful adjustments during the next month.
This is how I stay on budget with two simple numbers.
This same process also helps me track that month’s savings transfers to make sure I maintain a strong savings rate.
Why I also track the payment due date in Notes.
The reason I write the payment due date is to make sure I never miss a payment. This is the most important rule of responsible credit card use.
If you miss even one payment on a single credit card, that missed payment will appear on your credit report. Your credit score will also drop.
As a landlord, I play close attention to any potential tenant’s credit history and score. I am not willing to risk entering in a financial relationship with someone who has a history of missed payments.
We recently received an application from someone who has missed 8 of her last 25 payments on her auto loan. That was a major red flag.
I automate some, but not all, of my monthly payments.
While we automate most of our monthly payments and transfers, we don’t automate all of them.
Even though my wife and I only use two credit cards for our personal spending, we have business credit cards for our real estate properties.
We also have mortgages and HELOCs that need to get paid at various times each month. I use the Notes function to remind me when these payments are due.
For each credit account, I have automatic payments set up to pay the minimum required amount each month. I then pay the full balance each month manually.
That’s because we have various sources of income that come in sporadically throughout the month. It’s simpler for me to pay certain bills manually instead of automatically.
When you have multiple income streams, you have Parachute Money. Currently, our Parachute Money includes:
- My primary job as a mesothelioma attorney
- My wife’s primary job as an attorney
- Rental Property 1
- Rental Property 2
- Rental Property 3
- Rental Property 4
- Law School Professor
- Emergency Savings
Using the Notes function helps me make the required payments each month after these income streams hit my checking account.
What other benefits do credit cards offer?
Credit cards offer a variety of other benefits to entice customers. Besides tracking your spending, two of my favorite perks are purchase protection and credit score monitoring.
Purchase Protection and Fraudulent Charges
Purchase protection is so important in today’s world. The last thing any of us needs is for our personal finances to get wrecked by scam purchases or fraudulent charges.
Let’s say you buy something with Zelle, debit card, or cash. There are very little, if any, protections to get your money back if that transaction needs to be cancelled.
Credit cards, on the other hand, typically offer the best purchase protection available. If you’ve been scammed or deceived in any way, your best bet at fixing that issue is to work with your credit card company.
Also, credit card companies are generally very proactive and helpful in addressing fraudulent charges. If you do encounter any fraudulent charges, your credit card company will work with you to fix the problem.
While credit card companies are pretty good these days at spotting fraudulent charges, I like to double check my online account to protect myself. To make sure I have not been targeted, I take about 30 seconds to look at my credit card transactions each week.
Credit Score Monitoring
Most credit card companies today offer free credit score monitoring through one of the major credit agencies, like Experian. You can see your credit score right in your online account.
Your credit score will automatically update, usually once per month. You can see how your score changes from month to month and what factors currently influence your score.
This is a very nice perk, as long as you don’t obsess over your credit score.
How can I see all the benefits my credit card offers?
Because there are so many credit card options on the market, the best thing to do is look up the card you have or are thinking about applying for.
I prefer to visit websites like thepointsguy.com for thorough breakdowns and even valuations on each card’s offerings. This makes it easy to compare credit cards from different banks.
You can also visit the credit card company’s website directly to learn the full extent of the benefits offered by each card.
I use the Chase Sapphire Reserve and Chase Freedom Unlimited. Each card has a detailed webpage that details all of the benefits offered with the card.
My favorite credit card benefit is still the ability to easily track your spending.
Even with all these other benefits, my favorite credit card benefit is still the ability to easily track your spending.
I’ve found this to be the easiest way to ensure I’m staying on budget and hitting my financial freedom goals.
Do you use your credit cards to track your spending?
What are your favorite benefits to using credit cards, other than reward points?
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