Hi, this is Mr Credit Card from www.askmrcreditcard.com. I’ve read about Mr. and Mrs. Money’s credit card stories and today, I would like to talk a bit about how I actually use credit cards as a budgeting and convenience tool and also how I use it to save money. If you are looking for a better credit card, please check out my best credit card offers and deals section.
There are two camps and schools of thoughts with regards to the use of credit cards. One school believes credit cards are “evil” and they lead folks to overspend. If it were in the wrong hands, that is certainly true. Then there are obviously those like myself who pay off the bills in full every month and take advantage of reward programs. For folks like us, credit cards are simply a tool to be taken advantage of. But to me, there is more to that than getting rewards, I use credit cards as a way to budget, keep track of expenses, run my business and also make use of their various perks to help me save money. I’m going to list some features and show you how I do it.
Downloading statements to Quicken – My credit card details are downloaded into Quicken every month, which let’s me categorize my expenses the way I want it. Most credit card issuers allow you to download your statements into Quicken (which is the software most folks use). I guess you could do the same with your bank statements with your debit or check card. But either way, by avoiding the use of cash as much as possible, I find it much easier to keep track of where my money goes even if I do not keep the receipt.
Annual expense summary – Every year, Amex sends me a statement that highlights and breaks down all my expenses by various categories. While that data is available in Quicken, for those who do not use Quicken, that year end statement gives me a very good idea on what I’m spending on.
Auto Collision Insurance – Most credit card companies provide you with a free auto collision damage so you do not have to pay for that insurance when you rent a car. I find myself renting a car once or twice a year on our vacation. The fact that I do not have to pay for auto collision damages probably saves me a few hundred dollars a year.
Extended Warranty – Most credit card these days also offer extended warranty feature where you get additional warranty for products you paid with your credit card. I’ve been able to avoid a lot of “upsells” by stores like Best Buy etc when I buy electronics (where they try to hit you with extended warranty purchases).
Baggage Insurance – Years ago, my baggage was misplaced by the airline I was traveling. It was a real inconvenience. But I got some money (can’t remember the amount) from Amex. That helped me to get some new clothes and in fact, it helped me to replace some old stuff I had!
Cash rebates – The most obvious way to save money and help your budget process is to actually earn cash rebates. I’ve been using a cash back credit card the last four years (since I stopped traveling a lot four years ago). Every year, I have gotten over $1000+ from my Amex card. When I worked out the math, that is over 2% cash rebates. Before that, I was always constantly earning frequent flyer miles and getting free tickets. All this went into our holiday budget because I knew how much I was putting on the card, how much air miles I was earning and what sort of tickets I could get with it.
Organize business expense – With the exception of wages, and health insurance, all our business expenses go through our business credit card. This helps to separate our personal and business expense. We have use a business credit card that earns cash rebates and that is one way that we are saving on our business expenses. Once again, I can check my monthly non-wage business expense on my credit card and do some analysis with it.
Automatic Payment – The other big thing that a business credit card helps me in my finances is that I can set up automatic payments. I pay my utility bills and phone bills with my credit card. And I set up an automatic payment plan that takes money out of my bank account every month. I’m the sort of person that hates looking at bills and manually paying them, so this system helps me in making sure all my bills are paid on time. The only thing I have to make sure is that there is enough money in the checking account.
I’m sure there are other ways you can use credit cards – These days, many credit cards have features like email alerts etc, that will help you stay on top of what you are spending on your credit card. I’m sure there are other features that are around but I’m not using. For me credit cards have helped me in my finances in terms of saving money and also helping me be organized. For this to work, you do have to pay your bills in full every month. Once you get into the habit, I think it is a useful tool to have.