Can your credit card make you a wiser spender?

By Tim Sullivan

Credit cards have made it easier to spend money today than any time in the past. Before credit cards, you had to go to the bank and fill out a withdrawal slip whenever you needed easily spent funds. But now we have our money available to us 24 hours a day, which can be both a blessing and a curse.

Imagine making a few bad financial decisions while out on a Saturday night. Back in the day, if you spent all your money on Saturday, you wouldn't have it on Sunday. The banks were closed on Sunday, so unless you could find a place that would accept a check, football would be accompanied by whatever was in the fridge instead of a pizza delivery.

These days, with the easily available funds offered by credit cards, you can continue your spending unabated throughout the weekend. Because of this, many personal finance experts (and others) feel that credit cards are a saver's worst enemy.

But it doesn't have to be that way. Ease of spending doesn't have to come with lack of consciousness. Credit cards can make you a smarter spender as well. By keeping a close eye on your credit card records, you can use your card to improve your spending habits and realize more of your financial goals.

A helpful record

Unless you are saving every receipt and keeping a watchful eye on your budget, having cash in your wallet can lead to untracked spending. But with credit cards, you can use your card issuer's website to see every purchase that you've made, which can be useful for identifying and improving your spending habits. Some issuers even offer enhanced features for tracking your spending on their websites.

These days, I'm lost without online tools. If I have $100 in cash in my wallet one day and $20 in it two days later, I probably won't be able to tell you where that money went. With credit cards, however, I have a full purchase history on my computer. I can categorize my spending, track changes from month to month and see the areas I need to cut back on. With these records, it's easy to see whether I'm spending according to my priorities.

Targeting savings goals

Having this consciousness on spending can help you set aside more for savings as well. When you know how much you spend in certain categories, setting aside money becomes a simple matter of reducing your spending sharply in problem areas or, in the absence of those, aiming for across-the-board restraint. Trimming a small amount from a single category may not feel like much on its own, but start reducing from every category and you can end up boosting your savings quickly. For the best results, track your spending on a weekly or even daily basis to determine when you need to keep the plastic in your wallet for your saving account's sake.

From one perspective, the ease of spending that credit cards provide is a gift that allows us continuous access to our funds and free access to our transaction history. That convenience, however, can bring out some hard-to-control demons. The key to avoiding them is to always being aware of where your money is going.