Sorry Dave Ramsey fans, I like my credit cards. In fact, I use them to separate out and organize my spending. Credit cards let you download spending information for free, offer points and rewards back, are widely accepted and build my credit.
Before you even think about a credit card...
I'll admit, I did have to get out of some credit card debt once, I'm not perfect. I wasn't paying enough attention and had gotten into the habit of paying MOST of the balance but not quite the whole thing. The balances climbed up, and I was paying interest.
I got out of debt by sitting down with all my statements and looking at one number: PURCHASES. Credit card statements are loaded with fine print and they can be overwhelming with everything you've bought, but the number that matters the most is "how much did I spend last month" - it actually matters more than the balance! If your purchases are more than your income, you are going into debt. If your purchases are less than what you have available to pay down on them, you're getting out of debt.
The advice I give to people now is to know ahead of time what you're going to use a credit card for before you even apply for one. Will your income allow you to safely spend $500 on groceries and $300 on clothes? Great! Watch that credit card and makes sure you're under your goal. Your statement balance should never be a surprise.
The Magic of Tidying Up
I also use the "Marie Kondo" method of credit card spending. In her book about cleaning, she recommends holding each object and taking a moment to ask if it is sparking joy in your life. I do this with my spending. Rather than see a huge list of transactions when I pull up my statement, I program my cards to notify me about each transaction as it occurs. Some cards have apps for this, others have a text message setting. But they all tell me. This helps me notice right away if a bill or subscription has climbed up, or a surprise transaction happened that I didn't make. Even if I swipe the card myself at the grocery store, I get a text, and I appreciate the automation.
The cards I have
These change sometimes depending on deals and specials that come up, like airline points or opportunities at the bank, but this is the simple version.
My oldest card for charities
I got my first credit card at 18 and credit score advice is to keep it open. I use it to let charities auto-bill me. This is the only way I've ever found to meet my donation goals. I like the Christian advice to donate 10%, I do not like the Christian advice to give PURPOSEFULLY and consciously. It wasn't happening.
It's also nice to have one charity card for tax purposes. No going through statements to see what I donated, I know exactly what I donate every month because it's in one place.
Fidelity for automatic charges
Fidelity has a card that gives me 2% back into my kids 529 savings fund every month, no categories, no strings attached. I use it for automatic bills and subscriptions. It lives in a drawer. I sometimes use it for big purchases like a car repair because 2% is pretty good, but basically it's for things that I have to pay.
It's nice to have those streaming subscriptions in one place, too, so I can tell at a glance if we're subscribing to too many things. When I was a kid my parents always said I'd be a responsible, frugal person if I cut cable. So of course I cut cable, everyone cut cable in the early 2000s, right? But then we all subscribed to 6 different streaming services so we were spending more than we ever did on TV! We have to watch that. YES, Amazon prime counts, everything you get a monthly bill for counts!
Chase for spending
Chase has a really great app where I can see a weekly or daily snapshot of my spending and know if I'm on track. Because it's a separate card, I don't have to say "Well I know I spent a lot this week but the electric bill doesn't count..." My spending is all 100% stuff I control and can change from day to day.
Like many users, I like the points from this card. I have both the Freedom and the Sapphire Preferred, so I can get the 5% reward categories from Freedom over to the Sapphire points that transfer to Hyatt. My family gets a lot of free Hyatt nights in suburbs when we travel now.
Pay down the cards
I'm happy to say that I've paid every statement in full since 2018. You don't HAVE to go into debt if you have credit cards, lots of people don't! But it takes planning and organization, and for me, splitting the cards up for budgeting was the solution.
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