Updated: Feb 23, 2019
Before I type a single paragraph, let me be clear – the vast majority of people should NOT be using credit cards!
Research shows that roughly 86% of people carry a balance on their credit cards every month (i.e. they lie about paying off the card every month). That means for so many of us, the temptation to swipe, swipe, swipe is simply too much and we find ourselves swirling out of financial control with thousands of dollars in debt stacking up. For months, we spend like a kid in a candy store, paying only the minimum balance until one day we dare to look at that balance and our world comes crashing down. With an average of over $16,000 in credit card debt per American household, credit card debt has its proverbial foot on our necks, eating away at our income for years as we try to pay it all back!
For this reason, I actually advise my clients against using credit cards, BUT, there are so many people who simply refuse to give them up. So if you insist on using credit cards, here are the 6 Essential Habits of Savvy Credit Card Users (i.e. the 14% that never carry a balance).
1. USE ONLY THE CREDIT CARD
The #1 fatal mistake that I see people make is spending money from the credit card and the debit card during the month. You spend, spend, spend from the debit card, and once that’s all gone, you switch over to the credit card (or vice versa). Or perhaps you’ve confined yourself to the bank account while your spouse is swiping the credit card with wild abandon. Either way, you’ve spent so much money on both sides that you don’t have enough in the bank to cover the credit card balance when it hits your inbox.
By using only the credit card, you reduce the risk of not having enough money to pay off the balance when it comes due.
2. LIMIT THE CREDIT CARD BALANCE TO WHAT'S IN THE CHECKING ACCOUNT
A great rule of thumb is to limit your total spending on the credit card to the amount of cash that you have available in your checking account. If your bank account says $2,000 and you spend only $1,995, you guarantee that you will have enough money to pay the full credit card balance instead of just the minimum payment.
3. USE ONLY 1 CREDIT CARD
Open up the number of credit cards you have and count them. If you have more than one, then you have too many. I say this because another fatal credit card mistake is spending money on several different cards, which can add up fast if you’re not paying very close attention.
The reality is that many of us fail to check our credit card statements regularly, so that means we typically have no real measure how much we’ve actually spent. In fact, I have learned that people almost always underestimate how much they have spent during a given time period. That $700 you thought you spent is probably over $900 or even over $1,000.
Now take that same bad habit and apply it to multiple cards…Scary!
4. CHECK YOUR ACCOUNTS DAILY
Speaking of not checking the credit card statements regularly, do you even know how often you should be checking them? Daily.
That’s right! You should be checking your credit card and bank accounts every single day. In fact, if you look at the browser history of a self-made millionaire (which I have), it is not surprising to see their bank accounts show up every day.
It’s all about knowing what’s happening with your money. How much do you have? What did you spend it on? Did you get overcharged or double-billed for anything? Is there any fraud on your account? Am I overspending?
By checking your account daily, you can easily answer these questions.
5. HAVE A BUDGET (AND STICK TO IT)
Were you wondering when I would mention budgeting? Well here it is.
With a realistic zero-based budget in place, your expenses will always match your income. So if you base your credit card spending on your budget, you will not spend more than what is in your bank account. Spend less than what’s in the bank, and you have enough money to pay back the credit card company. Viola!
6. PAY THE BALANCE WHEN YOU GET PAID
This is a wonderful trick that I learned some time ago from a colleague and it has been invaluable information. As we sat chatting about business over lunch, he stated that he and his wife pay their credit card off weekly. Since they are paid on alternating schedules, they were able to simply take the weekly paycheck and pay off the credit card each week. As a result, they never carry balance.
I tried that trick and it just so happens, IT WORKS! As I sat in my chair at church paying tithes on my phone, I would immediately switch over to the credit card account and pay that off too. After that, there were no more monthly interest charges because the balance was always paid off!
Even if you don’t get paid weekly, shoot for it anyway. Not only does this force you to check your accounts more often, it will save you money due to a lack of interest charges.
You’re welcome (in my Maui voice – go watch Moana)
Tiana B. Clewis
Ready to become a #dreambuilder in your money, your life and your business?