Cory is a young man who wants to do the right thing. He’s been making smart financial choices, and he wants to continue to do so. But he’s worried that using his credit card is too easy. He’s come to ask GRS readers for help:

I’m 21. For three years, I’ve had a debit card and loved it. No more borrowing my parents’ credit card to make purchases! I can use it anywhere, just like a credit card. I have a pretty good memory, and almost always know exactly how much money is in my checking account, usually within a dollar. If I make a purchase, I automatically update my account total in my head, and whenever I actually check my account balance, I’m never shocked at what I see.

A couple of months ago, I decided to get a credit card and start building good credit. I’ve paid the bill diligently each month, but since I’m using credit, and not taking money out of an account, I just can’t seem to keep track of how much money I have vs. how much I’ve charged on the card. Each time I make a payment, it feels like I’m giving up more money than I should be, because all month long I’ve been thinking that the money I actually have is the money that’s in my account, not considering what I’ve charged on the card.

I know this is just a psychological thing, but I was wondering if your readers had any tips on how to help? I feel like I’m spending somebody else’s money until that bill comes, and I’d rather feel like I’m spending my own.

This actually causes me problems, too. One reason I got into trouble when I was younger was the lack of immediate feedback about how much had been charged to my credit cards. The spending was invisible and painless. It felt like free money. (Financial guru Dave Ramsey likes to say that when you pay cash, you can “feel” the money leaving you.)

Since I returned to the world of credit last year, I’ve been diligent about practicing good spending habits. I do everything a responsible credit card user should. All the same, I don’t always know my current balance, which was something I did know when I only used a debit card.

If Cory wants to feel more in control of his credit spending, he might consider the following:

  • Check your balances often. Almost daily, I visit my accounts online. This not only helps me keep tabs on my spending (and earning), but it also helps me stay vigilant for possible fraud and identity theft.
  • Use money management software. Last year, I shared a simple trick for tracking credit card expenses in Quicken. When I process my receipts every weekend, I create a placeholder transaction that shows I’ve already paid my credit card expenses. (Click that link for more info.) This helps me with my mental accounting.
  • Set cash aside immediately. Both ING Direct and my credit union allow me to have multiple subaccounts. If I didn’t already do the Quicken trick, I might consider moving cash from my checking account to a designated savings account whenever I used the credit card. This would prevent me from spending money I didn’t have and get it ready for me to pay the bill.
  • Pay for large expenses with the credit card, but use the debit card for everything else. It’s easier to remember a few big expenses than a bunch of small ones. If your want to keep the numbers straight in your head, only use your credit card for major purchases.

What about you? Does spending with a debit card feel different to you than spending with a credit card? Do you ever worry that you spend more than when you use cash? Do you have any tricks for keeping track of how much you’ve spent? What advice can you offer to Cory?

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