The evolution of my credit card use has been an exciting journey. The first credit card I ever had was a student visa. It only had a $500 limit, and I used it pretty sparingly. I still remember my first ever purchase, a pair of rubber boots to make it through my winter slog back and forth to my co-op work term.
Once I got out of school and started making some real money, I decided that it was time for a real, grown up credit card. At that point, I still didn’t know much about financial management. The limit on the card was $2,000, and it was a low-interest credit card. I didn’t have an emergency fund, so this credit card was going to be my emergency fund.
That credit card served me well for almost five years, but last year, I finally decided to get in on the rewards credit card game. I started out by doing my due diligence (I’d come a long way from my low-interest credit card days!). I went online and used multiple credit card comparison services to determine which rewards card was the best for my spending habits.
The card I ended up settling for was a rewards credit card that gives me points for everyday spending. Since I wanted to maximize my rewards, I started using this credit card for everything I bought, from groceries to even the smallest trip to Starbucks.
Using my credit card for everyday spending worked… for awhile. But after several months, my husband and I started to get a little free with our spending. The uncontrolled spending started around last Spring. The weather had turned warm, the bar patios were calling our names, and the income from my husband’s new job was burning a hole in our wallets.
After one particularly spendy weekend last summer, I realized that we weren’t doing ourselves any favours by putting every single expense on our credit cards. Sure, we were earning points like bosses, but we were overspending at least $20 a week, usually more. This extra money had to come from somewhere, and usually, it was at the expense of our savings goals.
So last summer my husband and I decided to put a harsh stop to our spendy ways, by switching to a cash diet. I don’t mean cash as in going back to using debit for everything; I mean cash like cold hard cash.
Using cash has added a certain amount of routine to our household. Every week, I move a specified amount of money into our chequing account, and every week, my husband withdraws that amount. That is our allowance for the week, and we spend it on groceries, alcohol, and nights out with friends. When the money is gone, it’s gone.
Reaching An Equilibrium
I’ve been on the cash only train for about eight months, and I still love it. Using cash is so easy, and we spend less. There’s something about having to hand over real bills that reduced our desire to spend.
The best part of my current strategy is that I rarely overspend. Overspending has now become a conscious decision. When the money is gone, we have to make a choice: do we need this thing we’re considering buying? Do we need it enough to pull out our plastic for it? More often than not, the answer is no.
We’re not perfect, we still pull out the credit card for takeout or a movie more often than I’d like, but the incidences of over spending have seriously, seriously decreased since going to a cash diet.
That’s not to say that I don’t still charge purchases to my credit card. I still do, all of the time in fact. I’m still earning rewards points on bills, gas, online purchases, and anything that isn’t part of our weekly allowance, like pet food and car repairs.
Oh, and I also use my credit card a lot for work, which I love because I get rewards points and I don’t even have to spend the money myself!
In fact, I recently visited RateSupermarket.ca to make sure my current spending habits still align with my current credit card. Fortunately, all is well, and I’m on track to earn some seriously decent rewards this year. Huzzah!
How do you use your credit card? Do you charge everything to your card? Do you sometimes overspend like me? I want to know!
Photo Credit: frankieleon