Credit Card spending plan doesn't work for me

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Do you make all your purchases by Credit Card, then pay it off in full every month?

Poll ended at Sat Oct 24, 2009 5:16 am

Total votes: 14

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Credit Card spending plan doesn't work for me

Postby nesterenes » Wed Oct 14, 2009 5:16 am

I've been managing a budget successfully for over 2 years now, spending less than what I earned. Two months ago I tried to change my spending habits to Credit Card spending which would be paid off in full every month. This system has failed for me. It's made me reckless with my spending. More willing to go ahead and buy lunch instead of making it. And spending money was just a little too easy. Nothing extreme, but spending clearly went up by +10%.

I think it was the idea that the money was virtually unlimited. When I spend money from the bank, once a purchase is made, the money's gone. It immediately disappears, so over-spending is impossible. That's not the case with Credit Cards. Overspending is the name of the game, and I realize I don't have the organization or will power to use a Credit Card. I accept that fact, and do like JD says... do what's right for you. Monthly CC spending is NOT right for me. I get it, I've learned my lesson, and I'm fortunate my spending didn't go too far before reverting to my old system.

It's all physiological I know, but if my method keeps savings growing and spending limited, then that's what I need to do. While those nifty rewards dollars sound great... it cost me more than it's worth.

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Postby Gearbanger » Wed Oct 14, 2009 5:35 am

I've had the exact same experience. Spent more with a credit card.

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Postby inovermyhead » Wed Oct 14, 2009 6:16 am

I agree, and am in a ton of credit card debt because of it. I say put the credit cards away and get back to the way you used to do it!

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Postby peachy » Wed Oct 14, 2009 10:41 am

My credit union just started offering a rewards credit card for everyday spending, where you get x% back (I'm not sure of the exact figure). I seriously considered it because I do keep track of my spending, but I normally use my bank's debit card for spending and cash if I go to the ATM and get cash.

My dad uses his credit card for everything, and I thought that I would be able to do it. I have a sneaky suspicion that I won't be able to spend the same amount if I don't carry any cash and only carry the card, so I didn't sign up. I didn't even try it because I really don't need another credit card (I have two. One is put away and one I carry with me for emergencies). Thanks for reassuring me that I won't be able to do it.

Good thing you recognized your patterns and stopped using it. Good save!

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Postby Adam » Wed Oct 14, 2009 11:08 am

I had been doing it for a few months. Then I started slipping, and that turned into a slide, then all of a sudden I was doing a balance transfer to get money off the higher interest rewards card. I'm thinking of stopping, rewards or not. I'll pay what bills I can with it, put major purchases on it for the consumer protection, but I don't think I should be using it any more for lunch or groceries. Rewards or no rewards.

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Postby brad » Wed Oct 14, 2009 12:47 pm

The thing to remember about rewards cards is that you can negate a full year's worth of rewards just by failing to pay one month's bill in full and having to pay interest. So I'd play that game very carefully. If you're not 100% sure you can pay your credit card bill in full every month, then don't follow the "use the rewards card for all purchases" strategy, because you'll end up losing more money in interest than you gain in rewards.

I have a rewards card, but I set myself a monthly limit to be sure I can pay it off in full every month. And I only use it for certain items: plane tickets, gas at the pump, online purchases, hotel bills, etc. I buy groceries and most local purchases with my debit card.

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Postby smartwonderwoman » Thu Oct 15, 2009 6:31 am

For me I am not fond of using credit cards and I never even get to use mine before and never applied for it anymore. I cannot do my savings. I stick to my goals especially if that would give good benefits for myself. Being realistic sometimes is good but taking the right decisions is better.
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Postby DoingHomework » Thu Oct 15, 2009 8:42 am

If you spend more because of what the credit card makes possible then it is probably not a good approach for you -

That said, I think it is important to develop self-discipline with everything in life. That is a part of "maturity." Some people grow old never developing maturity and some people develop it at a young age.

The trouble is, if you always use cash and construct a system to give yourself an allowance to prevent overspending then you are addressing the symptoms but not curing the disease. If you let the amount of cash in your wallet determine how much you spend that is hardly different than letting your credit limit decide that for you.

Ultimately you need to learn to take control of your spending by imposing your own mental self discipline.

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Postby mskalinin » Mon Oct 19, 2009 8:16 am

My husband and I use the CC for every purchase except rent and electricity. Its very easy for us to track our spending this way, since the description line reads out Groceries, or Gas/Automotive or dining, etc. We pay the bill every 2 weeks (pay day), maybe this is why we're able to use this system? Checking the expenditures and paying it bi-weekly keeps us on top of our spending.

But we don't really budget, we just try to maintain frugality all the time. We both have pretty frugal habits, so have been able to get away with this system. We save probably between 20 and 30 percent of our income monthly, after that we use our discretion. I find budgeting every cent to be too time consuming for our purposes.

FWIW, we haven't used the rewards yet on the card. We're thinking we might save them up till we can get flights somewhere, or something like that.

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Postby nesterenes » Tue Oct 20, 2009 9:36 am

Originally I was just using it for Groceries and lunch. My new rule is for Fixed-Cost items only. Things I am regularly spending money on (minus food, because that's where I go over-board).

So now I pay my cell phone bill, and utilities as able with the Rewards CC. Fixed cost items only. It's a little more work than my eBill banking system, but we'll see if it pays off!

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Postby Ziniath » Sun Nov 01, 2009 4:07 pm

I definitely spend WAY more with the credit card. I'm in the same boat, it's this psychological idea that there's just so much money there, that it would almost be impossible to "overspend", when in actual fact, that's all I'm doing: overspending.
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Postby Kris » Mon Nov 02, 2009 11:51 am

I use my sole credit card for food, plane tickets, and online orders. What keeps me from abusing it is paying the balance off every month, in total, the day I get my statement. Only having one card helps, too, because I don't lose track of my expenditures.

Good for you for recognizing your habits and moving to address them!

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Postby nonspecificwife » Mon Nov 02, 2009 12:53 pm

Ive realized that with credit cards I never can adjust to the idea that its real money and instead spend to my little hearts content. I use cash for most things, debit for convience at gas stations and grocery stores, and billpay to pay bills.

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Postby Minting Pennies » Tue Nov 03, 2009 8:27 pm

While I'm generally the type of guy who is "all in or nothing type", why not start this off slow. This is a radically different system and with all things drastic, it'll take time to get used to.

Why not try something like carrying and making purchases with the CC for the first week of each month, then automate payments to that card in the beginning of the next week. Do this for about 90 days ( which is recommended for developing new habits). Once you've succeeded, why not increase that to two weeks of the month, and so on.

This is the Personal Development topic after all, so I definitely agree that you should push yourself and try and build your discipline. That is the point of life, to grow. I think, if you implement a system where you slowly ease into a new habit, it might prove effective. This is somewhat like the debt snowball method where you try and conquer, small and immediate victories. The more you do it, the more your confidence will develop. And before you know it, you'll be carrying that CC around for whole months, and still maintaining your frugal lifestyle! Imagine that. It always begins with single small steps.

Good luck! :D
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Postby Sam » Thu Nov 12, 2009 11:07 am

We use credit card for travel, airplane tickets, rental cars, hotels, etc. and we carry it with us when we travel.

Otherwise we don't use credit cards and I don't carry mine with me on a day to day basis. I cut my monthly spending in half, on average, when I switched from credit to debit. Something about spending current dollars (vs. future dollars) and the fact that we limit access to current dollars through our allowance system forced me to reduce my day to day spending without dramatically changing my lifestyle.
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