4 Ways to Use Credit Cards as a Budgeting Tool in 2021

Credit cards are an incredibly useful financial tool that allows users to spend now and pay later. However, the excessive use of credit cards can become a habit, leading users into a debt trap. But such situations can be avoided by using a credit card in a disciplined manner.

Credit card transactions can easily be tracked and analysed and used to plan future spending and behaviour thus allowing the users to budget. You can easily use this feature of credit cards to not only build your credit score but also act responsibly while spending in the future. Other benefits of credit cards are that they help you in budgeting is that they provide you easy credit with no interest applicable on it for 30 days or your credit cycle duration. You can use the available credit limit to meet some urgent expenses while repaying the amount on or before the due date to avoid any interest charges.

Let’s look at some ways to use a credit card as a budgeting tool in 2021:

1.   Use Credit Cards to Manage Your Cash Flows

The credit card allows you to meet your expenses even when your pay-check has not arrived, or your salary has not been credited into your account. You can easily meet all your expenses the whole month and pay them off by paying the due amount on your credit card before the due date. This will help you avoid credit card charges or interest applicable on the overdue amount.

2.   Use Them to Build a Good Credit Score

Credit score is an important criterion used by banks and lenders to sanction loans whether personal or any other category. If you wish to have a good score for becoming eligible for any kind of loan in the future, you need to use your credit cards in a responsible manner. A low credit utilisation ratio and timely payment of all your credit card dues will lead to a good credit score.

3.   Use Credit Cards to Earn Reward Points, Get Discounts

A major benefit of using credit cards regularly is that you earn reward points which can be converted into cash backs or attractive discounts and access to offers that ultimately lead to money saving. You can even plan your expenses in such a way that you earn the maximum possible reward points and exchange them for attractive discounts.

4.   Set Limits on Credit Card Usage

You can use your credit card for budgeting by setting spending limits at the beginning of every month and ensuring that you do not use your card beyond that limit. Also, since the details of all the transactions carried out via the credit card are available in the statement, you can easily compare the actuals with the planned levels and take corrective action.

Credit card interest charges can be kept to a minimum by repaying the due amount on time. For this, plan your finances and expenses well. Checking your credit card statement can help you identify the expenses that can be curbed.

David Curry

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