I have a little confession to make that (in the world of personal finance) can be somewhat controversial: my husband and I use a credit card for all of our spending. Groceries, gas, going out, clothing, pet care, absolutely everything.
Now, why on earth would we do that when staying out of debt is a primary goal? Why would we put all of our monthly spending on a credit card when we just finally paid off the last of our accumulated credit card balances? (Accumulated over about 8 years, no less!)
For us, the reason is simple. It makes budgeting and maintaining a joint checking account easier.
Ease of budgeting
One of the problems we had when all of our spending came out of the checking account is that sometimes big expenses would hit right as big payments like the mortgage were also scheduled to go out. Also, it was stressful for me to always have to look at the checking account balance and weed through tons and tons of little check card purchases to find big payments for the mortgage or utility bills. There was also always the possibility that too many little expenses would add up right before a big bill posted and … oops…. potentially overdrawn account.
Having two people spending from a joint account also adds to the confusion. There are twice as many check card purchases and all the money going out of the account consistently throughout the month was stressful for me. It was harder to isolate our spending and figure out how much of our budget we’d already used up. Just looking at the checking account balance didn’t tell me how much we’d spent unless I took the time to subtract out all the bills.
The solution for us was to put everything on a joint credit card and pay the bill in full every month. That’s the key: you must have the discipline to keep the credit card spending within your budgeted allowance and pay it in full every single month. I realize this method won’t work for everyone… especially if you’re still working on paying down other debt.
For us, this system means all of our spending comes out of the checking account at once, in the form of a credit card payment. It makes budgeting and planning bills so much easier because I know I just need to have X amount of dollars in the account to pay the credit card bill on the 15th of every month.
It also consolidates and isolates all of our spending into one number. To keep on track with our budget, all I have to do is look at the current credit card balance and I know exactly how much we’ve jointly spent for the month.
Fraud protection and security
In addition to helping us budget, I also appreciate the added security a credit card offers. Think about it… if fraudulent activity occurs via your check card, the money is actually gone until the bank puts it back in your account. I’ve had this happen before. If a crook uses your check card on a Friday at 5pm and drains the account, the money is gone until at least mid-day on Monday. That makes for one very stressful weekend, let me tell ya. Imagine this scenario if you know your rent check is also about the clear on Monday, and you have other bills to pay.
If fraud happens with a credit card, the bank (not you!) is out the money until they remove the charges. Your cash in your account is right where you left it… available to pay the mortgage and other bills. While check cards say they offer the same fraud protection, in reality they don’t. In a case of fraud, your money is missing instead of the bank’s money. In my book, that’s a huge difference.
We still carry our check cards in case we need cash but, we’ve set very, very low daily limits on the cards so that if they are stolen, the checking account can’t be drained.
With charges for things such as rental cars, a credit card offers more protection than a check card. Many credit cards actually insure the value of the rental car so you don’t have to purchase insurance from the rental company.
And, many people really benefit from credit card rewards programs such as airline miles and cash back. This is actually a next step for us. We want to do some research and find a credit card that gives us the most rewards so that we have the added benefit of free perks (or free cash back) from purchases we already make anyway.
What about you? Would this plan be a nightmare for you? What system works best for your monthly budgeting?