Some readers are worried about my change in stance regarding credit cards. Misuse of best rewards credit card was the chief reason I came to be buried in debt. For years after coming to my senses, the only way for me to cope with credit cards was not to have one. I still believe that this is the proper course of action for anyone who hasn’t gained control of her finances, and I would never condemn anyone for choosing not to own a credit card.

Now that I have a card again, let me assure you that I’m taking steps to ensure I stay out of trouble. I am not using credit unless I know that I already have money in the bank for the item I’m purchasing, and I’m paying my credit card bill as soon as it arrives. But there’s one other trick I’ve developed that might be useful for some of you who still have credit cards but are afraid of misusing them. Earlier today, Jethro wrote:

With a credit card, your checking account balance does not reflect purchases that have yet to be billed. If you stay within your budget, this shouldn’t be an issue… but for a control freak like myself, the fact that the checking account balance is not up-to-date just drives me crazy.

This used to cause me problems, too. One reason I got into trouble before was the lack of immediate feedback about how much had been charged to my credit cards. The spending was invisible and painless. Now when I plug numbers into Quicken at the end of the day, I make two entries for each credit card transaction: one to the credit card account, and one to a “dummy entry” in the checking account, like this:

Here I’ve just made a payment of $1310.86 on my credit card, which was the full outstanding balance. The remaining $591.73 is money that was charged after the billing cycle ended, and which will appear on next month’s statement. In my checking account, I have a “placeholder for Visa” item in the amount of $591.73. This is a constant reminder that I’ve already spent the money. Every time I charge something to the card, I enter it in the Visa register and increase the “placeholder for Visa” amount.

This one simple trick has made a huge difference in how I perceive the money I’ve charged on credit. Now I know that when I’ve spent it, I’ve spent it!

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