6 ways to budget with your Credit Card when your cost of living is too high

Having enough money to purchase everything you need is a dream come true, and when you don’t have enough funds for important things right away, your trusty credit card is always yours! However, impulsive buying is never a good idea, and you may buy things you don’t need - making responsible credit card behavior essential.

When used wisely, there are multiple credit card benefits that can prove to be healthy for your financial planning, especially when you like to lead a good life. 

Here are 6 areas where you can create a budget with your credit card to track expenses better when your cost of living is too high.

Cash flow and expense tracking
 

One of the best uses of credit cards is that you can take advantage of the usual 45-day payment cycle to settle bills. This gives you breathing room to manage your cash flow through the month better. For instance, if you have a major expense coming up in the middle of the month and do not have enough funds to bill the purchase, simply opt to use your credit card and make the payment. 

Furthermore, when creating a budget, one of the uses of credit cards is that they help you track all your purchases. Each financial transaction can be seen systematically as a part of your credit card statement, category-wise. You can see which category is eating away at your money and adjust your habits. This breakthrough feature of credit cards proves to be extremely useful when creating a budget.

Availing of rewards and perks
 

Another definite advantage of using credit cards to fund purchases is that you can access various perks and rewards. Every time you use a credit card for a transaction, you earn points on the same. Once these points accumulate, you can convert them into cashback – or even fund another major transaction, such as buying a flight ticket! Most credit card issuers run various reward programs that must be utilized whenever applicable. 

Prioritizing recurring monthly bills
 

It is important to prioritize monthly expenses and make payments systematically using a credit card for better clarity. Prioritize bills that need to be paid first, such as your house or office rent and your monthly EMIs, while keeping other expenses such as car registration or gym membership fees for later.

Also, consider choosing a credit card billing cycle that favors your salary payout day, giving you the bandwidth to leverage the 45-day payment cycle. 

Spending only as needed
 

Money management is all about understanding the areas that justify your spending and realizing which expenses require a second look. It is prudent to adjust your spending patterns as you go along the process of creating a budget that aligns with your personal finance plan. For example, substituting an overseas vacation with a domestic trip can save you a lot of money, helping you create an emergency fund for later. Doing this will give you more flexibility to manage your spending and create a better budget. And if the travel category on your credit card has reached the threshold limit set by you in your budget, you can take the necessary steps to immediately correct the same and avoid spending more in that specific area.

Paying mortgage with a Credit Card
 

Using your credit card to clear mortgage payments makes sense in certain situations. You can earn huge rewards by clearing your debt dues using your credit card. Imagine a scenario where you want to avail yourself of the welcome bonus of 80,000 points on a new credit card but do not have enough expenditure to reach the desired amount to be eligible. Simply use your credit card to pay off your mortgage but consider whether the rewards you earn will be higher than the card processing fees you will have to pay. You can avoid late payment fees or default on your loan payments by first paying off your mortgage and then paying off your credit card dues from your pay cheque.

Using a Credit Card for fixed costs
 

Establish your monthly fixed costs, such as house rent, insurance premiums, daycare costs, etc. List out variable costs like grocery or utilities and periodic costs like travel, gifts, and school expenses. By averaging your annual spending, you can turn both variable and periodic expenses into a fixed cost. Doing this will give you an exact picture of all your fixed costs, and you can easily anticipate any upcoming costs. Avoid unnecessary credit card debt by saving extra money every month – a helpful strategy while preparing your budget.

Conclusion

These tips and tricks should help you budget efficiently with a credit card. Stay mindful while using your credit cards, and watch the magic happen as your financial health improves. IDFC FIRST Bank’s credit cards assist you in the process of creating a budget with some amazing features such as zero joining fees, low interest rates, low APR, and reward points that never expire. Stick to your financial budget while maintaining your lifestyle!

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.