7 tips to budget with a credit card
Use your credit card statements, spending limits and account alerts to stick to your monthly budget.
April 28, 2022 5 min read
Creating and sticking to a budget might take some work. But your credit card comes with some helpful tools that you can use.
Your monthly statement is one. And you can do things like maximize your credit card rewards, set spending limits and set up automatic payments to help you stick to your budget. Keep reading to learn more about these and other tips for budgeting with your credit card.
1. Keep track of credit card transactions
Whether it arrives in your mailbox or electronically, your monthly credit card statement is like a diary that lists where you’re using your card and how much you’re actually spending. You may also be able to look at your transactions at any time with your banking app or by looking at your account online.
Some credit card issuers will group your expenses together under categories like groceries, gas and housing. If your issuer does not categorize them, it’s helpful to do it yourself using a budget worksheet like this one from the Consumer Financial Protection Bureau (CFPB). A budget worksheet features common expense categories and makes it easy to add up the money that’s going out so you can compare it to the money that’s coming in.
Now that you can clearly see how your essential and nonessential expenses stack up against your income, you may want to ask yourself some candid questions like:
- What expenses are necessary and unavoidable?
- Which ones can I scale back on?
- Do I have money for unexpected expenses?
- Am I setting money aside for my savings and retirement?
It’s a good idea to take an honest look at your expenses, make essential expenses your top priority and set realistic goals on the spending you have control over, like dining out, travel and clothing. Then stick to your budget—and try to resist impulse purchases, which can spoil even the most carefully planned budget.
2. Use credit cards to stick to your 50/20/30 budget strategy
Once you’ve figured out what categories your expenses fall into, you may want to consider using the 50/20/30 budget approach. This is just one budgeting method that involves spending up to 50% of your after-tax income on needs and necessary expenses like your groceries and rent or mortgage. Then, using 20% for savings and investments and 30% toward things you might want, like vacations or going out to dinner.
Having a credit card that can help you track and group your expenses by category might assist you with this budgeting strategy. There may be another budgeting approach that best fits your needs and income, though.
3. Maximize credit card rewards
As you’re paying for your various expenses, you may want to consider using a rewards credit card.
If you use your card responsibly, you might be able to earn rewards like cash back or miles. And then you could redeem them for things like gift cards or a statement credit, depending on the card. That can give you some wiggle room in your budget. For example, with Capital One’s QuicksilverOne card, you could earn 1.5% cash back on every purchase, every day.
4. Set up account alerts
You may be familiar with alerts that some credit card issuers provide to help prevent suspected fraud. But did you know you might also have the option to set up spending alerts? These alerts could notify you every time a purchase is approved on your card or just for items over a specific amount.
Eno, your Capital One assistant, can help you stay on top of your spending by monitoring your credit card account. Eno may send you spending insights about duplicate charges, recurring charges, tips that are higher than your usual amount and more.
5. Set up auto-pay for all credit cards
To help you stay on track with your budget, you might want to consider setting up automatic monthly payments for your credit card account. That’s when you schedule for money to come from your bank account to make payments on a specific date each month, like the bill’s due date.
You could have options to pay the minimum payment, your last statement balance or a fixed amount. Setting up automatic payments might help you avoid things like late fees, which could help you stay within your budget.
6. Set spending limits on your credit card
Once you’ve created your budget, it might be hard to stick to it. That’s why setting a spending limit for your credit card transactions can help.
You may not be able to formally set a spending limit with your credit card issuer—it’s more common for authorized users and with business credit cards—but you could decide on a limit for yourself.
But be sure to keep an eye on your credit utilization. It measures how much credit you’re using, and it’s an important factor for calculating your credit scores. According to the CFPB, experts recommend keeping your credit utilization below 30% of your total available revolving credit. So if you have only one credit card with a limit of $2,000, that would mean keeping your balance below $600.
7. Use your card responsibly
Now that you know how to budget with a credit card, here are other tips for using your credit card responsibly:
- Pay your credit card bill on time, every time.
- Make at least the minimum payment every month. And if you can pay off your statement balance, you might be able to avoid interest charges.
- Keep your credit utilization ratio below 30%.
- Only apply for credit you need.
- Monitor your credit. One way to do that is by using CreditWise from Capital One. You can also visit AnnualCreditReport.com.
Creating and sticking to a budget doesn’t have to take a lot of work. With your credit card and the tools it offers, you can be on your way to a brighter financial future.