2 steps to beneficial credit card spending

By Georgie Miller

Sometimes it seems to me that every personal finance article on the Internet suggests that the only side effect of credit card use is overspending. And obviously overspending is something that needs to be avoided. However, it is actually possible to use credit cards to keep your spending in check.

How? By being a conscious consumer, you can use a credit card to simplify your record-keeping and make better spending decisions. Try the two steps below to see if you can use your credit card to improve your finances.

Step 1: Track your total balance

By tracking the total amount I've spent each month rather than considering each individual purchase, I can more easily decide the effect that purchase is going to have on my bottom line. Let's say a friend asks me to go to dinner and I have $30 in my wallet. Since I only withdraw cash that I can afford to spend, I would probably say yes.

But let's say that instead of the cash cure, I decide that I'm going to put all my monthly spending on one of my credit cards. I may spend $200 on my typical biweekly visit to the grocery store to stock up on basics. Once I've done that, however, then suddenly that $30 dinner looks a lot more expensive.

Why bring my balance to $230 when I already have $200 worth of food at home? When I think of the situation from the perspective of my running balance, I am likely to invite her over for dinner at my place instead. And we'll probably have a better time to boot!

I tend to check my credit card balance two or three times per week. As a result, when I pay using my credit card, I'm not thinking, "This latte only costs $3." Instead, I'm thinking, "It's July 15 and my balance for the month is already $750! Do I really need this?"

Step 2: Don't divide your spending

This "running balance" technique is most effective when you are not dividing your spending among multiple credit accounts. Putting all your monthly spending for things like gas and groceries on one card is the first step. However, to truly maximize this system (and to give yourself the clearest idea of your total monthly spending), you can also set up as many regularly recurring bills to get paid through that card as possible.

So take a look at your cards and determine where you get the most bang for your buck. Maybe your priority is travel, so a free airline credit card is your best bet. Maybe you have a super-long commute and a gas rebate credit card is more your speed. Or maybe you have children and a grocery credit cards will do you the most good. Whatever works for you!

Once you've identified your card of choice, see whether you can use a credit card as the payment method for any of your regularly recurring bills. From there, you can set up these up with auto payments. My massage membership, TV streaming service, renter's insurance and cell phone payment are all set up to be charged to the same credit card.

The advantages are numerous. First, I never have to worry about missing a due date. Everything's automatic! Second, I don't have to worry about how much money is in my checking account at four different times of the month. Instead, I can make a single payment on the day that's easiest for me. And finally, because I am earning rewards on my purchases, I am coming out ahead.

Remember to put your credit card skills to good use. Rewards cards are only a good deal if you don't carry a balance. If you do carry a balance, it's likely that you are paying more in interest than you are earning in rewards. Don't fall into that trap! Move any balance you are still paying off onto a zero-interest balance transfer card instead, and don't charge anything additional to that card. Save your monthly spending for your rewards card.