How to Use Credit for Everything You Buy
About five years ago, I got into some
As soon as I started earning enough
I only really started using credit again about a year ago. My debt was paid off, and I knew I was missing out on some credit card rewards and protections by only using debit.
Now I use credit for as many purchases as possible. The only time I pull out my debit card is when I need to get cash back at the grocery store. Otherwise, I swipe one of my credit cards and collect miles or cash back rewards. I'd use credit for everything , if I could.
But I had to figure out how to assure myself that I could always pay off the bill, in full, every month. That I would not let myself fall into credit card debt again.
I know that the short answer is "just don't spend more than you earn," but if it were that easy, then none of us would ever get into credit card debt. So we need a few additional strategies.
Here's what worked for me, as I worked my way back to using credit for the majority of my purchases:
Build up a savings buffer
I have two built-in buffers to ensure I always have enough money to pay off my credit cards: a $3,000 buffer in my checking account, and a savings account. If my checking account dips below $3,000, I use my next few paychecks to pay myself back-which is to say that I deliberately plan not to spend a certain percentage of each paycheck because it's owed to the buffer.
I also put 15% of each paycheck into a savings account. That money isn't for my credit card bill-it's for my emergency fund, the money that gets distributed into my Roth IRA, and future life goals like down payments-but I know that I can pay off my credit cards with that money if I absolutely have to .
At this point you're probably thinking one of two things:
- I could never set aside $3,000 plus 15% of each paycheck.
- You only have $3,000 in your savings account?! I prefer a cool $10K.
I'll leave that there to remind you that we spend and save based on what we earn, so set your savings buffer in a way that makes sense with your own earnings. But if you're going put all your purchases on credit, you need some kind of a buffer in case you spend more than you earn in a single month.
Plan as much of your spending in advance as possible
If you want to make sure you don't spend more than you earn, you have to plan your spending.
Notice I didn't say "budget." I'm not a huge fan of budgets as many people use them, which is to say they guess how much money they'll spend on certain categories. They'll put $300 into "restaurants" and $500 into "clothing" because it feels about right , or because their budgeting software told them that's the average amount they spend in that category every month.
I like to look at the entire month and figure out how much I'm likely to spend. Do I have any restaurant meals on the schedule? What are those meals likely to cost? What kind of travel will I be doing this month? Are there birthdays or holidays that require gifts? Is this the month that my Amazon Prime bill comes due?
By planning my spending in advance, I can figure out exactly what I can afford to buy-and which purchases will have to be cut, economized, or postponed until the future.
Don't plan to spend every dollar you earn
Something always comes up before the end of the month, so if you can afford to not spend your entire paycheck , don't. You still might spend it all, because something always comes up before the end of the month, but you'll be less likely to go over.
Let your apps help you
Check your credit card balances. Daily, if you want. If you're using an app like Mint or YNAB, you can get push notifications when you've overspent in a certain budget category. Know how much you're spending, so you know when you're spending too much.
At this point, you might be thinking that these are less "how to use credit card" tips than "how to manage your money" tips. That's because credit cards are there to help you manage your money. I mean, technically they exist so the banks can collect a bunch of interest, but from your point of view credit cards are designed to help you smooth your cashflow, earn rewards and protections, build your credit score, and manage your finances.
If you keep that point of view at the front of your mind as you plan and track your spending, you can use credit cards for every purchase without being afraid that you'll run up a bill you can't pay off.