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In some ways, small purchases on credit cards can be more damaging than the large purchases. While it depends on your individual style of personal finances, I find that — in general — it’s the small purchases adding up that pose the most serious problem in terms of credit cards. Before you know it, those small purchases made using credit cards can add up to one big bill.
Small purchases and your psyche
Whipping out the credit card for a small purchase doesn’t seem like a very big hit. I know that when I use a credit card for a large purchase, all I think about is how quickly I can pay it off. I worry about the big credit card purchase.
The small credit card purchase? Not so much.
Small amounts of between $10 and $75 don’t seem like such a big deal. You just put it on the card and forget about it. After all, it’s such a small amount. It’ll be cake to pay it back.
Unfortunately, these small purchases on credit cards tend to add up. Since we don’t really think about the small purchases, many of us don’t keep a running total of what we’ve put on these credit cards. So when the statement arrives, it can be a real shocker.
I remedy this problem by using personal finance software to track even the smallest of my purchases made on credit cards. That way, I can keep tabs on what I am spending throughout the month, and cut back where needed.
A friend of mine actually deducts what she spends on her credit card from her checking account. That way she can ensure that she does not overrun the money she actually has. Then she writes a check to cover the entire balance. She gets the reward points without paying the credit card interest.
Do you have any tricks you use to avoid over-spending with your credit cards?
image credit: sxc.hu
889 days ago
[...] cards, but for the purpose of this post, we’ll mainly address credit cards.) Whenever you use your credit card, what you purchase goes on record. And it may start affecting your credit score. At the very least, [...]
Thanks for your thoughts, Richard! I like the idea of asking yourself “what’s the worst that could happen?”
I do like the credit card for the reward points, though. Although I can see where it would be nice to use cash — ensuring that you don’t go giving away information on yourself every time you pay for something
Instead of asking myself questions like “do I need this?”, “is this purchase a good deal?”, and “what could I use this item for?”, I ask “what’s the worst thing that could happen if I don’t buy this item?” If I don’t buy it, will I really need it later and then have to pay a higher price? “Really need” has to be within the next few months (especially with technology), because prices are constantly falling and opportunities appearing.
I only have a debit card, but I prefer cash because I don’t have to log stuff; if I buy something at the store I know exactly what I’ve paid because there’s no way the store can (accidentally) take more of my money. They don’t even know my name. And I stay fiscally responsible because cash feels more valuable than plastic.