One of the most common complaints about using a credit card is that you’ll end up spending more than you need to just to earn more points or cash back. That’s why I use a budget to set goals and keep my expenses under control.
But I don’t rush home to enter the receipts into my budget after every purchase. I pay for everything using a credit card and then look at the monthly statements to track expenses in various spending categories.
Related: Best Financial Tip – Spend Wisely
Using A Credit Card To Track Expenses
This approach has three benefits. First, it eliminates the need to use a 3rd party budgeting tool like Mint to track your everyday spending. Just review your online statement two or three times a month and then compare that with your budget.
Second, it’s great for cash flow. Since you’re paying for everything with a credit card you’re able to take advantage of a 21 to 30 day interest free grace period before the balance is due. This is a good way to keep and maintain a minimum balance in your chequing account and waive any monthly fees.
Third, you can maximize your credit card rewards by figuring out how much you spend each month and in which categories you spend the most money. If you spend a lot on groceries and gas, you can look for a cash back credit card that rewards you more for spending in those categories.
Review Your Spending
When I looked back at my expenses this year I found that my credit card bill averaged about $3,050 a month. Here’s how that breaks down into specific spending categories:
- Groceries – $625/month*
- Costco – $375/month*
- Gas – $155/month
- Recurring bill payments – $275/month
- Dining out – $250/month
- Prescriptions – $50/month
- Other – $1,320/month
*Note this includes things like diapers, cleaning supplies and household supplies
Look At Your Options
I’ve been using the MBNA Smart Cash MasterCard for all of my non-Costco purchases. I was able to earn about $500 cash back with this card because I had another six months of 5% back on groceries and gas when I upgraded to the Smart Cash World MasterCard.
MBNA reduced the amount of cash back you could earn starting December 1st, 2012, so now is a great time to review my options.
If I continue using the Smart Cash World MasterCard next year – assuming the same spending level – I’ll earn $369 cash back ($350 because you need a minimum of $50 to get a cheque).
My best option would be to use the Scotia Momentum Visa Infinite. That’s because you can earn 4% back on groceries and gas, plus 2% back on recurring bill payments and prescriptions.
With the Momentum Visa Infinite, I’ll earn $535.80 after subtracting the $99 annual fee. That’s 45% more than I’d get using the Smart Cash card!
Do you use your credit card to help track your expenses?