“Studies show that people spend more when they use a credit card versus when they spend with cash.” = You’ve heard that before, right?
This also applies to debit cards for people who don’t keep up with their balances, but today I’m talking mostly about responsible credit card use for you people out there who insist on using your credit card – you know who you are. 😉
Statistics show that people spend more money when using plastic because it doesn’t feel like cash. This is true. But like a lot of things, the cash solution doesn’t bode true for EVERYone.
The easiest way to prevent overspending, not just with a credit card but across the board: Follow your budget. If it’s not in the budget DON’T BUY IT. Period. No telling yourself that you can pay if off next month, next week, or even tomorrow. When you slide your card or stuff it in a chip reader or use it online, keep in mind that you have to pay for that purchase, with actual money that you have in the actual bank or under a mattress somewhere.
Just because it doesn’t feel like money, doesn’t mean that it’s not money. It is money. It’s YOUR money. And do you really want to pay more for something tomorrow because you couldn’t wait until tomorrow to buy it? It will still be there. And if it’s not, you don’t get to have it. You’ll live.
If you wouldn’t take cash out of the bank to pay for it, you don’t need to buy it. Ever. Imagine if you had to march over to the bank and take out $100 every time you wanted to buy a pack of coins for a mobile game. Would you still do it? If you would, great, buy it, but if you wouldn’t, then don’t.
Don’t ever use a credit card just so it hurts less to buy stuff. When you swipe that card or whatever, treat those purchases like you would treat purchases made with your own money. Because it IS your money when it comes time to pay the bill.
I have put this to the test myself before I axed the credit card. I honestly didn’t spend a dime over budget. I did go over certain categories, but I stuck within my budgeted perimeters overall. And I do go over some categories sometimes in general anyway, so it wasn’t anything out of the ordinary. I just take it out of another category. Easy peasy. 😛
So, why would you go through all this trouble to spend money on a credit card only to turn around to pay it all off at the end of the month? For the points or cash back or whatever, of course! And if you don’t spend more than budgeted, and if you don’t ever carry a balance, it’s not stupid to get excited over a few extra pennies. Just don’t let it make you spend more money! You’re not getting enough cash back or points for it to EVER be worth it.
When I banked with Bank of America, they have a program that gives you between 5% to 15% cash back on purchases at certain places, up to a certain amount. So you can get 10% cash back at say like AutoZone up to $20 back. And that can be exciting. But I found myself trying to talk myself into making purchases at certain places because I knew it would result in $10 cash back, and that is just not smart.
It’s not worth it to spend $100 on something I wouldn’t have normally bought for $10. I would come out $90 in the hole! Most of the offers expired after just a few weeks, and the vast majority of them were places I didn’t shop at ever. So, the final piece of advice on using plastic: Don’t buy something just to get the reward. Only buy stuff you were buying anyway. The credit card company is still happy because they get money from the swipe fees (better known as interchange fees), and you are happy because you have an extra $20 in your pocket at the end of month, and you didn’t even have to anything special or irresponsible to get it!
Now, go have responsible fun. 🙂