How to stick to a budget when you use credit cards

Borrowing & Credit

Updated Aug. 27, 2021, at 11:25 a.m. CT

When used correctly, credit cards can be a powerful credit-building tool. But how do you stay on budget when you use credit cards?

Follow these tips to stay on track with your budget—and your credit—while using your go-to piece of plastic.

Why a budget is important

Establishing and following a budget can help you:

Prioritize your spending
Manage your money
Set money aside for the future

Filling out a budget worksheet helps you identify your expenses and assign a job to every dollar you earn.

“Learning how to budget and save now will help you in the future when you have bigger expenses like a car loan or a mortgage,” said Dupaco’s Mariko Kurobe. “And it’s easier to rework your budget to include those bigger expenses down the road because you’ve already established those budgeting and saving habits.”

Learn how to create a zero-sum budget >

Basics of using credit cards

Before incorporating a credit card into your budget, it’s important to understand how to use a credit card properly. Doing so can help you establish and build your credit.

When using a credit card, it’s important to:

Pay your balance in full each month
Make your payments on time
Keep your credit usage in check, using no more than 20% of your available credit each month. (That’s because 30% of your credit score is based on how much credit you have available.)

Before you swipe, remember …

It’s easy to overspend with credit cards, and studies say as much.

Research has shown we tend to spend more when paying with plastic instead of cash. A lot more, actually. An MIT study found that shoppers spent up to 100% more when they made purchases with a credit card instead of cash.

Not only is it quicker to pay with plastic, but there’s another phenomenon at play. Forbes puts it this way:

“When someone buys an item with cash, they immediately know how much that item cost, which can be painful. However, when someone pays with a credit card, there is a time period between when they purchase the item and when they have to pay for it, which makes the cost seem less important, according to Psychology Today.”

How to use credit cards within your budget

So, how do you avoid overspending with a credit card?

Kurobe offers these tips:

|1| Set a credit card spending limit

Once you establish a budget, you’ll know how much you can realistically afford to charge—and pay back—each month. Even though your card’s credit limit might be $1,000, that shouldn’t be your spending limit.

Remember: Your credit card spending should total no more than 20% of your credit line.

|2| Use activity alerts

Set up activity alerts to receive real-time notifications when your credit card is used. This can help you track your spending throughout the month and keep your budget top of mind.

|3| Check in on your account

It’s also a good idea to log into Shine Online or Mobile Banking at least a couple of times each week to take a big-picture look at your credit card purchases for the month. Do you see any surprises? Are there certain areas you’re overspending?

|4| Use the categories

Organizing your spending into categories within Shine Online can help provide a clear picture of where money is being spent. When you know where each dollar is going, you’re more empowered to make changes to your spending habits and informed decisions to reach financial goals.

|5| Shop with a list

Regardless of how you pay, using a shopping list can help you avoid impulse buys. And it makes it easier to stay on track with both your budget and your credit.