How to Use Credit Cards to Budget and Track Your Charges?

This sounds a bit strange since we generally associate credit cards with overspending and incurring gratuitous debt, which leads to financial strain and difficulty in managing finances. also, how do credit cards figure then? Well, credit cards can be relatively useful if you use them wisely and responsibly.

Let’s first look at a question to which numerous of us wouldn’t have a ready answer. What are your yearly charges? Yes, this number would change every month due to the seasonality of your charges or due to some unplanned charges. Still, do you have an average number?

When I interact with guests and ask them about their yearly charges, I get only vague answers. And it happens because they’ve no way tracked this number. This is more likely to be when your cashflows are comfortable or when you retain a lot of cash in your bank account.

And why haven’t they tracked? Because it’s clumsy and time-consuming.

Not knowing how much you spend every month has consequences. However, you’re likely to err on the conservative side and the cash will gradationally keep piling up in your bank account If you’re doubtful. You would set up drafts( or recreating investments) for a lower quantum than you should. More importantly, you may be spending much further than you allowed you were. And spending further means savings less.

To manage the spending, you need to measure it first.

So, if you’re floundering with “ why I don’t have anything left at the end of the month, ” you need to track and dissect your charges. You formerly know your yearly income. With a firmer grip on your charges, you’ll be suitable to plan and budget more. You’ll be suitable to plan for the seasonal charges( insurance decorations, academy figures.) by saving for similar charges every month. This will reduce the burden in the months when similar charges come due

How Can Credit Cards Help in Budgeting?

As mentioned over, the crucial problem is tracking charges.

It’s delicate to track your charges if you use cash for payments unless you record all the deals diligently on a spreadsheet.

It’s also not easy if you make all the payments online from your primary bank account because that will have cashflows of all kinds. House rent, EMIs, investments, tips, interest, and of course all small and big charges. Plus, you can snappily tell by checking your primary account balance how important you have spent in that month. Because you must have started the month with an anon-zero balance and also the balance would keep shifting with these inrushes and exoduses. Not insolvable but this makes internal accounts delicate.

What’s the workaround?

Make ALL your charges on your credit card Groceries, caffs, drugs, caffs, promenades, food delivery, and entertainment.

When you look at the credit card statement at the end of the month, you would know how important you have spent and where you have spent. A simple way to figure out your yearly charges. Once you have the number, you can dissect the charges to see the areas of leakage. Areas where you’re spending much further than you allowed or you should. Or indeed during the middle of the month, you can snappily check your card account to see how important you have spent. You can look at the outstanding quantum( or current pretenses ) to know where you stand.

Plus, a credit card also provides you with a way to limit charges. You can set up a yearly sale limit on your credit card. Yes, you can set overall yearly spending limits and indeed per-sale limits for different types of deals( trafficker/ online/ valve and pay/ ATM). The yearly spend limit is a punch to control your charges once you inch near the spending limit.

This limit can be arbitrary originally. still, as you get a better hang of your yearly charges, you can upgrade it.

Once the yearly limit is in place, you can fluently keep an eye on how much you have spent every month. And how important you can spend the rest of the month without any guilt. Once you know you’re approaching the yearly limit, you can prioritize essential charges and control optional charges.

And flashback, all this trouble is a waste if you don’t pay your credit card bills in full on or before the due date. also, it’s easy to overspend when you use a credit card. thus, be responsible with your credit cards.

But There Are Limitations

There are many payments you can’t make using a credit card. In case, you can’t pay your domestic help using a credit card. Or an original vegetable seller. Taxis and motors. Or a roadside tea cube. There are numerous merchandisers that don’t accept credit cards. also, you may not be comfortable swiping your credit card at every shop.

For similar charges and at similar places, you might want to pay using cash or UPI, or bank transfers.

Now, you can use credit cards for cash recessions too but that isn’t a good idea. UPI’s relation to credit cards is still not completely functional. presently, only Rupay cards are allowed. For other cards, the commission structure( trafficker reduction rate) still needs to be worked out.

Now, these charges can add up to quite a bit. What do you do for similar charges? If you use your primary bank account for similar charges, it leads to the clutter we set out to avoid.

There’s a simple result for this
  1. Open a new bank account. Let’s call this a secondary bank account.
  2. At the launch of the month, transfer plutocrat from your primary account to the secondary account. You can link this account to any UPI app( Paytm, GPay, PhonePe, or indeed the bank’s own mobile app) and use this for payments where you can’t or don’t want to use your credit card.
  3. still, withdraw from the second bank account, If you must withdraw cash for any payments.
  4. Pay all credit card bills simply from this secondary bank account.

By the way, before, you couldn’t use credit cards for paying house rent. Now, you can but you must pay redundancy.

It Does Not Have to Be a Credit Card

The intent is to be suitable to get a real-time view of your yearly charges. And you don’t need a credit card for this. However, you can still track and manage your charges, If you don’t enjoy a credit card for any reason( the bank won’t offer you or you don’t want to apply for one).

In fact, you can do that from your primary bank account too but that can be a bit of a pain.

The stylish option is to open a new bank account( secondary account) and make all your charges from that account. Just transfer the plutocrat from the primary account to the secondary account at the launch of the month. And start tracking and managing your charges.