I recently got a credit card which is linked to an airline, and has a flyer points program for every dollar spent on the card in each billing period.

Wanting to make the most of this, I started using the card for all of my day-to-day purchases - everything goes on the card so that it's earning points.

My problem is that my previous method for budgeting involved working out of a basic savings account - once my salary was deposited, savings were removed, bills paid, and the remainder was the budget for the month. Now that all purchases are going on the credit card, it's difficult to determine my current position with respect to my available funds.

I don't want to get into a cycle of loading up my credit card each month, paying it off with my salary, having no available cash and purchasing everything on credit, repeating the process.

What are some useful strategies for sticking to a budget while also earning my credit card rewards?

  • How much time do you spend flying? Is a couple of times a year worth the expense (and I assume annual fee) of this card? – MrChrister Oct 19 '11 at 16:06
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    The card offers 4 free (buy one get one free) flights per year, which in itself makes it worth the $99 annual fee. I fly with my partner to my parents for Xmas each year, so it more than pays for itself just in doing that. The points on top of that are a bonus, so I suppose I could not use the card except for redeeming free flights. – John Lyon Oct 20 '11 at 0:10
  • This question is applicable to any credit card that offers rewards, cash back, etc. – Michael Mar 17 '15 at 20:34
  • I'm pretty sure this is part of the reason they offer rewards credit cards – dwjohnston Jan 23 at 4:33

11 Answers 11



If you have to have a hard limit on your account that prevents you from spending - credit cards are not for you.

If you can discipline yourself not to make purchases in excess of your budget even if the plastic technically allows it - then you can go on using the credit card. Make sure to stay on top of your spendings by frequently checking your current activity on the card (on line, don't wait for statements), and making sure you're below the limit you have set for your budget.

Mint.com visualizes your spendings and shows where you are with regards to your preset budgets on various types of spendings, you should consider using it as an aid.

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    I guess my biggest issue is oversight - when using the savings account the absolute amount of money left stares you in the face when you use an ATM or login online, moving to a credit card I've lost that. Mint.com looks good but it's for US accounts only. – John Lyon Oct 19 '11 at 1:34
  • @jozzas maybe if you tag your question with the location, people would be able to suggest similar services available in your country. But even if there are none, you can do it yourself by checking on-line how much you spent and making sure you're not going over a limit. Once you see that you're spending too much - just put the card into a drawer and stop using it. – littleadv Oct 19 '11 at 3:28
  • @jozzas, can't you check your credit card balance from the ATM? If you keep in mind that you don't want to go above $x over the whole month it doesn't seem that much more tempting than having a savings account you can take cash from. – poolie Oct 19 '11 at 7:20
  • @jozzas I see that you're in Australia, in which case the mint.com equivalent would be getpocketbook.com, strongly recommend it. – jon2512chua Nov 24 '14 at 7:37

I am like you with not acknowledging balances in my accounts, so I pay my credit card early and often. Much more than once a month. With my banks bill pay, I can send money to the credit card for free and at any time.

I pay it every two weeks (when I get paid), and I will put other extra payments on there if I bought a large item. It helps me keep my balances based in reality in Quicken.

For example, I saved the cash for my trip, put the trip on my credit card, then paid it all off the day after I got home. I used the card because I didn't want to carry the cash, I wanted the rewards cash back, I wanted the automatic protection on the car rental, and I couldn't pay for a hotel with cash.

There are many good reasons to use credit cards, but only if you can avoid carrying a balance.


Do yourself a favor: calculate the price of airfare, calculate how many points it takes to get a good flight, and calculate how many points you get per dollar spent.

What you will find is that it is a ripoff. Leave the card at home and unlink it from your online purchasing accounts. You're welcome.

If you really want to earn rewards, just put your necessary bills on that card. Over time it will accumulate, but do the math first so you can weigh the consequences.

  • And you're welcome ;-) – Chris W. Rea Oct 19 '11 at 15:41
  • I'm guessing there was a grammatical error – CQM Oct 19 '11 at 16:00
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    A good point. The real reason I got the card is that it allows 4 buy one get one free flights each year, and this is completely separate from the points. I'm starting to think it may be best to leave this card in the drawer and only use it when it comes time to purchase flights. – John Lyon Oct 20 '11 at 0:12
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    I don't understand how free is a ripoff. – Sean W. Oct 25 '11 at 17:50
  • The original question is actually good for any card with rewards or cash back. If you are not getting 1-1.5% cash back you are essentially leaving money on the table anywhere credit cards are accepted. – Michael Mar 17 '15 at 20:46

If you keep going over budget with your credit card, then stop using the credit card.

If you plan to pay off the card every month, then your balance should always be under whatever your budget is. For example, if you budget to spend $500, then even though your card has a limit of $5,000 you will never carry a balance of over $500. Most banks have an option to email and / or text message you when you pass a certain balance threshold; in this instance, you would set two notices, one when your balance exceeds $400 (warning you that you're close & need to start paying closer attention), and one when you exceed $500.

Additionally, maybe you aren't ready to pay for everything with your credit card. I prefer to use mine just for groceries, and then pay it off at the end of the month. Whatever rewards you get for putting all of your purchases on the card are more than paid for when you cross your budget limit, costing you more in interest and fees. Perhaps starting with just one type of purchase (groceries or gas are good choices, as most consumers are fairly consistent in their purchases of both) would allow you to ease into using the card until you get used to managing your budget with it.

Personal finances are all about behavior, not knowledge. Don't worry too much about slipping up right now and making a mistake; just keep practicing good behavior with your credit card, and soon managing your budget with it will be as natural for you as when you only used cash.


First of all, I have to recognize up front that my "spending personality" is frugal. I don't recreational shop, and I save a lot of my total income. Building a budget and sticking to it is difficult, especially for people who are closer to living paycheck to paycheck than I. Theoretically, it should be easy to stick to a budget by overestimating expenses, but for many people planning to spend more than necessary isn't a luxury available.

That said, I have a system that works for me, maybe it can work for you. This system lets me see how much I have to spend, and close to optimally arranges assets.

  1. Three tiered accounts. Credit, Checking and Savings. The goal is to pay off credit cards in full every month from checking, and to maximize the amount in savings, without incurring financing charges, overdraft fees, or running into the savings transaction limit.
  2. I track these in GNUCash, which you can do it with other tools I'm sure. Where GNUCash might be a bit special is Scheduled Transactions (SXs). I use these to generate regularly occurring transactions, like grocery shopping or the cable bill. I have between twenty and thirty of these, and they generate transactions 30 days before they're to happen. It's important that you capture both expenses and income or the next step will fail. It's also important to include a transaction to pay the CC in full every month =)
  3. Every paycheck (two weeks) I take a moment to see how the account tiers are standing up. In particular, GNUCash will calculate future minimum balances. This is how I determine which way money needs to flow: if the future minimum balance is low, I transfer money out of savings. If it's high, I do the opposite to earn more interest.

As you can see, this system relies on some pretty strong upfront planning and adherence to the plan. And what you might not realize is that you can deviate from the plan in two ways: by spending variations and by timing variations. Credit should really help with a lot of the timing variations; it takes a series of expenses and translates them into one lump payment every month.

As for spending variations, like spending 20 dollars for lunch when you only budgeted 5, it turns out this technique helps a lot. Some academic work suggests that spending with plastic is more likely to blow your budget than cash, unless you make detailed plans. But it sounds like your main problem is knowing whether you can afford to splurge. And the future minimum balance of your checking account can be your splurge number.

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    This probably would only work for someone who is single. It seems like there is always a budget buster with married people. – Dunk Oct 21 '11 at 14:07
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    Do you mean "budget buster" as in an unexpected event, or as in a ... personality? – jldugger Oct 21 '11 at 20:48
  • I meant personality. It seems like most couples I know have a spender and a saver. So while you might have the best budget in the world defined, if you are married you can't make that budget happen unless you get cooperation from the other person. It is easy to follow a budget when you define it, not so easy to convince someone else to follow the budget. Of course there are ways to be a real A@%#E to force them to follow it, but that doesn't do much for the relationship. I'd rather be poor with a solid relationship than rich in a miserable one. – Dunk Nov 10 '11 at 22:58

You can fairly simply make a spreadsheet in your favorite spreadsheet application (or in Google Docs if you want portability). I like to make an overview page that shows how much I take in per month and what fixed bills come out of that, then break the remaining total into four to get a weekly budget. Then, I make one page per month with four columns (one per week), with each row being a category. Sum the categories at the bottom, and subtract from your weekly total: voila, a quick reference of how much you can spend that week without going over budget. I then make a page for each month that lists what I bought and how much I spent on it, so I can trace where my money's gone; the category total is just a summation of the items from that page that belong in that category.

Once you have a system, stop checking your bank balance except to ensure your paycheck is going in alright. Use the spreadsheet to determine how much you can spend at any time. Then make sure you pay off everything on the card before the end of the month so you don't incur interest.


Similar to what Adam F says above, except instead of just transfering the amount you spend on the credit card into the high interest account, why not keep the majority of your funds (apart from a small amount, say a couple of hundred for emergencies) in the high interest account until the credit card needs to be paid off. Even better, if you have a mortgage with an 100% offset account keep all your funds in this, and pay off your credit card in full from it on or before the due date. Being a 100% offset to your mortgage interest rate you will be saving at a higher rate than a high interest rate savings account, and you will be able to do all your normal banking from it unlike a high interest account which you usually have to link to an additional account to deposit and withdrawl money to and from.

If you are to use a credit card keep these simple rules in mind:

  • try not to change your spending habbits from before getting the credit card;
  • only use the credit card when you have the money available in you account and use it to buy or pay for things you would of bought and paid for without the credit card (avoid impulse buys);
  • put all your excess money into the highest interest account you can find;
  • if you have a mortgage try to get it linked to a 100% offset account and keep all your savings in it;
  • pay off your credit card in full on or before the due date, and if you do this make sure your credit card has an interest free period;
  • if you do forget to pay off the full amount due on your credit card by the due date, then you will need to call the bank for a full payout figure and pay this amount off (not just the amount due on your statement) as this will avoid you being charged additional interest in future months.

Hope this has helped,

Regards Victor


The trick to using a credit card responsibly is accounting.

With your old system, you were paying for everything out of your savings account. Everytime you had an expense, it was immediately withdrawn from your savings account, and you saw how much money you had left.

Now, with a credit card, there isn't any money being withdrawn from your savings account until a month later, when you have a huge credit card bill.

The trick is to treat every credit card transaction as if it was a debit card transaction, and subtract the money from your "available funds" on paper immediately. Then you'll know how much money you actually have to spend (not by looking at your bank statement, but by looking at your "available funds" number), and when the credit card bill comes, you'll have money sitting there waiting to go to the credit card company.

This requires more work than you had with your old system, and if it sounds like too much work, you might be better off with a debit card or cash. But if you want to continue to use the credit card, you'll find that the right software will make the accounting process easier. I like YNAB, but there are other software products that work as well. Just make sure that your system accounts for each credit card transaction as it is spent, deducting the amount from your budget now, so that there is money set aside for the credit card bill. Software that simply categorizes your spending after the fact is not as useful.


Easy... Use cash, or keep a ledger.

  • Using cash would mean that I'm not earning rewards on my credit card, in which case I should just cancel it, no? Would I update a ledger daily? Can you link me to a good example of one for a household? – John Lyon Oct 19 '11 at 1:46
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    I use GnuCash - it's nerdy but it works. I just type in my receipts every couple of days, and I can see how much I spent on different things this month, year, etc. – poolie Oct 19 '11 at 7:21
  • @jozzas If you can't keep track of your spending, the interest and extra money you blow will more than make up for your airline points. – duffbeer703 Oct 20 '11 at 0:00
  • @duffbeer703 I agree, hence the question. I've only had the card a few weeks and want to make sure things don't blow out. – John Lyon Oct 20 '11 at 0:05
  • You do realize that you can go online and see all your transactions? No reason for a ledger. – Dunk Oct 21 '11 at 14:05

As long as you can be trusted with a Credit Card i find that if you have a setup that uses three accounts: 1. your Credit Card, 2. 2. a high interest internet account (most of these accounts don’t have fees), 3. a savings account. The Method that works for me is: 1st i calculate my fixed monthly bills i.e Rent and utilities and then transfer it into my high interest account. for the month whenever i make a purchase i transfer the money into the high interest account ( this way I can keep a running balance of what money I have left to spend in the month. Then when the Credit Card bill comes I transfer the money out of the high interest account across to pay off the Credit Card ( this way you generate interest on the money which you would have spent throughout the month and still maintain $0 of interest from the Credit Card) over a year you can generate at least enough money in interest to go out for dinner on one of free flights!


In your comment in response to this answer, you said that your biggest issue is oversight, which you can do by checking your online bank account regularly.

Mint.com looks good but you're in Australia? Easy, check out getpocketbook.com. Using it and love it, helps a lot to track your tracking, and it's a god-send during tax time.

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