Credit cards are the most popular method of making purchases after cash. But if you are not disciplined, credit cards can significantly increase your total expenditure.
If you are buying something that costs more than what you find reasonable or you can afford, then you would hesitate if you are paying by cash. On the other hand, most people rarely think twice before presenting a credit card for a payment.
The bottom line is that if you use a credit card, then you just keep spending more and more. You get used to living beyond your means and end up with a huge credit card debt. And when you carry forward your balance, you have to pay interest on it, which can be a huge burden on your finances.
It is also easier to keep track of how much money you have spent if you pay by cash. If you use a credit card, then you would not know how much money you have spent in a month until you check your balance or receive your statement.
However, this does not mean that we should give up credit cards. Credit cards serve many important purposes. They have a rewards system that can prove to be quite beneficial. The credit line can come in handy when you urgently need money. Credit cards can also be used to build a good credit history. Moreover, many hotels and other establishments will ask you for credit cards as a guarantee that you’ll make the full payment.
Therefore, you need to learn to keep your spending low even when you are using a credit card. There are many tools that can help you in sticking to your budget. For example, you can use software tools like Quicken to have a better control over your finances. You should regularly check your credit card balance to find out how much you spent on food, clothing and so on. Work on areas where you are spending more than you need to, and set limits on your purchases through your credit card.
You should shop using the credit card that has the lowest interest rate. Determine the amount of money that you can pay towards your credit card bill every month and make purchases accordingly. Use cash whenever possible and keep your credit card for online purchases and bill payments.
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