by: Debbie Dragon

For people who have learned the effective way to use credit cards, they know they can be a useful budgeting tool. Here's how to use credit cards to your advantage, and actually help yourself keep to a budget:

Determine your average monthly income. If you are a on a salary, write down the amount of income you earn every month (take-home pay). If you have a variable income, find your average monthly salary by adding up your income for the last several months, and then dividing by the number of months you added the income for.
Determine your monthly expenses. Go through bank statements and account statements for the last few months and make a list of everything you pay regularly. Find out the total of your monthly expenses (note - if this number is greater than your monthly income, you need to make some adjustments! Either reduce your expenses or increase your income).
Select a credit card. If you already have a card you like, you can use that one, or maybe you'd rather select a card that offers a valuable rewards program based on your unique spending habits. Look for a card with low interest and a rewards program you'll use - one with cash back, gasoline rebates, or travel programs.
Use your card all month long. You know how much your expenses and purchases are each month. Refer to your expense list and use your credit card to pay for everything that is on that list. Make sure you are not spending more than what you have on your expense list just because you're paying with credit - that's how you get into trouble!
When your statement comes, pay the bill. You can write one check to pay your credit card statement in full, and this is the key! You don't want to carry a balance from one month to the next because you then pay interest and finance charges on that balance. This defeats the purpose of using the credit card as a budgeting tool. If the card you use has a rewards program, you'll also be benefiting the most from that by paying the balance off in full each month.

Using a credit card gives the opportunity to set many of your accounts to automatically pay on their scheduled due dates. It elminates the need to remember to send your payments out, and saves on stamps and check fees. You will have a much easier time balancing your checkbook each month, since the bulk of your transactions will be coming from your credit card, too.

Did you find this article helpful?

Compare Credit Cards

Business Credit Cards