How You Can Budget With A Credit Card

by Hank Coleman

Budget with a credit cardMy wife and I budget a little differently than most families. We budget with a credit card. We use a credit card for most of our purchases instead of cash or checks, and use that to monitor our family’s monthly spending.

According to a recent Gallup poll, fewer than one-third of Americans follow a detailed written budget every month. Out of those who do, not all of them strictly follow their budgets. This may be a stark indication as to why American families are in financial trouble, with shrinking savings and increasing debt.

So why do we have such a hard time sticking to a budget? Perhaps we feel our spending is often too hard to track. If that’s the case, we might need to simplify things.

Budgeting the Traditional Way With Cash and Envelopes

Many financial experts, like Dave Ramsey, recommend that families use a written monthly budget and account for every dollar they spend. Ramsey even goes so far as to suggest that families use a cash envelope system, in which there’s an envelope for every category in your budget, such as housing, entertainment, gas or groceries.

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For example, if you and your family budget $100 each month for eating out, you would place $100 cash in an envelope. You spend the cash until it’s gone. When envelope is empty, your family has to stop eating out.

There’s a reason people say cash burns a hole in your pocket.

My wife and I found that the envelope system worked — as long as I remembered to bring her the receipts after making a purchase. But I can’t even remember to use a coupon I have in my pocket at the cash register most days, let alone track receipts.

So the envelope method of budgeting just didn’t work for us. That’s why we switched to budgeting with America’s favorite financial invention — the credit card.

Many Advantages of Budgeting With a Credit Card

You might not realize all the perks that come with credit card budgeting. Using a credit card for all our purchases gives us a real-time accounting of our spending. We can see exactly what we’re spending and where it’s going. And many credit cards will categorize your purchases on your monthly statement.

Cash, on the other hand, is a nightmare to track. It’s far too easy to lose track of your cash. There’s a reason people say cash burns a hole in your pocket. It’s so very easy to fritter away. There’s little documentation to accompany our carefree cash spending.

When you use cash, you have to keep receipts and reconcile them with your written budget. But by using a credit card, you have a paper trail of your spending all in one place, either online or in your monthly statement.

Another advantage of using a credit card for budgeting is that it gives you an opportunity to accumulate reward points for your everyday purchases that you wouldn’t otherwise earn. My wife and I pay our rent, utilities, cellphone, cable and other monthly bills with our rewards credit card. We then earn an enormous amount of reward points through these purchases every month — all while budgeting.

There are a few other ways that you can budget with a credit card. Check out the rest of the tips on budgeting with a credit card on AOL Daily Finance.

Note: This article originally appeared on AOL Daily Finance and is reprinted with permission. See the full article on AOL Daily Finance.

About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and is currently pursuing his Certified Financial Planner credentials. Email him directly at Hank[at]

Hank Coleman has written 525 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.

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{ 13 comments… read them below or add one }


I actually find I lose track faster with credit/debit cards. I use my bank accounts to automate the household bills and gas for the car. I use the envelopes for area that can get out of control. In my house that’s groceries, eating out, entertainment, blow money and clothing. I think people overthink the envelope system. I do not track every dollar spent in each category. I get x dollars/month for groceries. I buy what I need and have never gone over. I’ve used it all in months like December when extra baking happens but never run out before month end. Anything left over either rolls to the next month or I use it for stockpiling staples. I don’t buy clothing every single month, usually just changes in season so I fill that envelope each month and roll it until it’s needed (never know when kids will hit a growth spurt). This has been my most simple budget method EVER. It’s actually lasted 6 whole months!



I hate cash for the reasons outlined in the article. Also, if you lose it, that’s it. If you lose your credit card, the issuing bank will credit all unauthorized transactions. Most of my credit cards earn rewards, so I pay everything with a credit card except rent and one utility bill, thanks to my bank account that requires one automatic bill payment to avoid the maintenance fee.

Can you please explain how you’re able to pay rent with a credit card? Does your landlord allow this or did you find a loophole? I’ve been trying to find a workaround so I won’t incur fees that would offset the benefit of reward points.

My property management company only allows checks written from the original lessee since it’s rent-controlled. The alternative is to use an ACH transfer from my checking account to their bank, for a FEE! By principle, I refuse to pay additional money for the “convenience” of paying a bill.


Hank Coleman

My landlord allows payment by credit card. For the first few years, there was no fee to pay my rent by credit card. But, they have started to pass on the merchant fee they pay to Visa and MasterCard to the tenants just this year. So, now paying by credit card adds an additional 3% of the rent as a fee for the connivence.


Practical Cents

Love this and completely agree. This is what I do as well. I agree with you that cash is very difficult to track plus I love the rewards I get from credit cards. Of course you have to pay them off in full at the end of the month. Wish I could put my mortgage on the card.
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Caryl Anne

You can definitely budget on a credit card, but it takes responsibility and work. Personally, this isn’t for everyone, which is why it’s best to compare and research any option beforehand to figure out which one best fits you and your needs. Thanks for sharing your advice!


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