Why your credit card is encouraging you to spend more money
Did you notice an increase in spending once your credit card application was accepted, even just a little? If so, you might be wondering exactly why your credit card is encouraging you to spend more money. After all, if you are anything like me you dutifully pay your balance of in full every month, and don’t go crazy maxing out your card with unnecessary purchases.
Even if you are sure using your credit card hasn’t increased your spending one bit, it’s worth taking a closer look at it, since it’s the small unnoticed amounts here and there that add up to much larger amounts, more significant.
How your credit card could be causing you to spend more
So how could your credit card be causing you to spend more? When you use a credit card, it can become all too easy to make purchases you might not have otherwise made, with the mindset that it doesn’t matter, you don’t need to actually pay for it with your own money until next month. Or even worse, if you don’t have the cash now, you might spend with the thought that you will have the money next month, so you can worry about it when the credit card statement arrives.
How can you work out just how much extra your credit card is costing you?
There is an easy way to pinpoint just how much extra your credit card might be costing you, and it involves strictly using cash. For one month, use a purely cash budget rather than reaching for your credit card every time you make a purchase, taking note of every transaction, no matter how small. Then, at the end of the month compare your cash only month with a typical month of using your credit card. By doing this you will get a clear picture of whether your spending habits are being influenced by your credit card, and if they are, in what way.
Take note of any differences in spending patterns. Are you finding yourself making small purchases more often, such as coffee or magazines, just because it’s so easy to whip out your credit card? Once you become aware of any changes in your spending behaviour, you can then make an effort to change them. Tracking your spending every few months is always a good habit irrelevant of whether you have a credit card or not, as it’s only when you know where your money is going that you can plug any spending holes in your budget.