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.

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.

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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]MoneyQandA.com.


Hank Coleman has written 528 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.


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