Trouble sticking to a budget when using credit cards for day to day transactions?
Discipline. 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. 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. 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. 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." 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: 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. 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.
Unless a study accounts for whether the users are following a budget or not, it is irrelevant to those who are trying to take their personal finances seriously. I can certainly believe that those who have no budget will spend more on a credit card than they will on a debit card or with cash. Under the right circumstances spending with cards can actually be a tool to track and reduce spending. If you can see on a monthly and yearly basis where all of your money was spent, you have the information to make decisions about the small expenses that add up as well as the obvious large expenses.  Debit cards and credit cards offer the same advantage of giving you an electronic record of all of your transactions, but debit cards do not come with the same fraud protection that credit cards have, so I (and many people like me) prefer to use credit cards for security reasons alone. Cash back and other rewards points bolster the case for credit cards over debit cards. It is very possible to track all of your spending with cash, but it is also more work. The frustration of accounting for bad transcriptions and rechecking every transaction multiple times is worth discussing too (as a reason that people get discouraged and give up on budgeting). My point is simply that credit cards and the electronic records that they generate can greatly simplify the process of tracking your spending. I doubt any study out there accounts for the people who are specifically using those benefits and what effect it has on their spending. A friend of mine has two credit cards.  He has specifically arranged with the card issuers so that the billing cycles are 15 days out of sync.  He uses whichever card has more recently ended its billing cycle, which gives him the longest possible time between purchase and the due date to avoid interest. "If psychologically there is no difference to you between cash and debit (you should test this over a couple of months on yourself and spouse to make sure), then I suggest two debit cards (one for you and spouse) on your main or separate checking account. If you use Mint you can set budgets for each category (envelope) and when a purchase is made Mint will automatically categorize that transaction and deduct that amount from the correct budget.  For example: If you have a ""Fast Food"" budget set at $100 per month and you use the debit at McDonalds, Mint should automatically categorize it as ""Fast Food"" and deduct the amount from the ""Fast Food"" budget that you set.  If it can't determine a category or gets it wrong, you can just select the proper category. Mint has an iPhone (also Android and Windows phone) app that I find very easy to use. Many people state that they don't have this psychologically difference between spending cash and debit/credit, but I would say that most actually do, especially with small purchases.  It doesn't have anything to do with intellect or knowing that you are actually spending money.  It has more to do with tangibility, and the physical act of handing over cash.  You may not add that soda and candy bar to your purchase if you have visible cash in your wallet that will disappear more quickly.  I lived in Germany for 2 years before debit cards were around or common.  I'm a sharp guy and even though I knew that I paid $100 for the 152 DM, it still kind of felt like spending Monopoly money, especially considering that in the US we are used to coins normally being 25 cents or less and in Germany coins are up to 10 DM (almost $10) and are used more frequently than paper." "Keep track of everything you buy.  Write it down and be accountable.  Try not to buy anything on credit cards, if the money is not in your account now then you can't afford it.  Ask yourself whether what you're buying is a ""need"" or a ""want"". If you find that you are buying things because you are bored and you like shopping then try taking up a (cheap) hobby that fills that void and is something you enjoy doing." I agree with the first poster- the first step is to measure your spending and put it down into raw numbers. Once you have the raw numbers, you will feel a natural inclination to improve on those numbers. Set yourself a daily target for cash / incidental expenses. It doesnt have to be a crazy target - just something you can achieve easily. Mark a 'tick' mark next to every day on the calendar that you meet that target (or spend less than the target). Gradually the momentum from the past few 'ticks' will automatically compel you to want to tick off the next day.  At the end of each week, lower the target a little. You'll find that when you start measuring your expenditure, you become more aware of how you might be wasting money. All too often we just go out and buy stuff we don't need without really thinking about it. "Lots of good answers here about budgeting and other ideas.  Here's a couple more: Think about offense and defense.  Offense is how much money you make.  Are you making enough to survive on?  Is there a way you could bring in more income?  Defense is what you do with your money.  Do you have expensive habits?  Do you have problems with impulse spending?  Do you live in an expensive area with a high cost-of-living?  Think about some of these areas and pick one to attack first. If it is the defense side that is causing you problems (you did mention trying to live on less), consider reading Your Money or Your Life by Joe Dominguez and Vicki Robin.  There's a really good summary of it on the authors' site.  The basic idea of the mechanical part of the book is that you figure out how much you're truly making per hour, and then evaluate your expenses based on how many hours of your ""life energy"" you are using for that expense.  Then you evaluate whether you think that's a fair trade or not.  There's a lot more to it than that, but it's an interesting way to get a different perspective on your spending habits, and may be enough to entice you to change those habits." "I sort of do this with credit cards. I actually have 4 AMEX cards that I've accumulated over the years. Certain types of expenses go on each card (""General expenses"", recurring bills, car-related and business-related) I use AMEX because they have pretty rich iPhone/Android applications to access your accounts and a rich set of alerts. So if we exceed our budget for gas, we get an email about it. Do whatever works for you, but you need to avoid the temptation to over-complicate." If it's feasible, try to get one card down to zero balance, and preferably one of your cash-back cards.  Then keep that at zero every month (pay it off in full), and use it for your purchases as you describe above. The idea would be to get it so that you are not paying interest on your month to month purchases.  This not only reduces the 20% or whatever that you're paying on that balance, but also the 20% or whatever you're paying on those purchases - remember, a card you carry a balance on charges you interest on those purchases from the current month. If this isn't feasible (if these are all very high balance cards), then I suppose the way you're currently doing it would be okay, though I think you're overthinking things to some extent - but with 80% interest, if that's a significant pile of money, you may need to as clearly that needs to be tackled first.  I think it's mostly better for you to pay your day to day stuff out of pocket and not use your cards the way you are suggesting, but with the 80% loan(s) you may need to. The reason I say it's better not to use your card the way you suggest is that it is difficult to do properly and never get it wrong (i.e., never go over a balance), and it's also leaving you in the habit of using credit.  It doesn't help you budget necessarily, either.  Instead, set up a fully developed budget that includes all of those minimum payments and pay them.  Certainly once you have the > 50% debt handled, I would switch to this method (not using credit cards at all). "Budgeting is a tool for planning, not for execution. It sounds like you don't have a problem BUDGETING (planning what to spend on what things) but rather with the execution of your plan. That is - living frugally. This is primarily an issue of self control and personal psychology - not an issue with the mechanics of budgeting and finance, which explains why the most popular personal finance ""gurus"" (Dave Ramsey, Suze Ormond) deal as much with your relationship to money and spending as they do with financial knowledge. There is no easy answer here, but you can learn to spend less. One helpful thought is to realize that whatever your current income is, someone in your community is currently making less than that and surviving. What would you do differently if your real, actual income was $100 or $200 less than it is currently. If your food budget is a concern, learn to cook cheaply. (Often, this is more healthy.) You mentioned schooling, so I assume you are on or near a college campus. Many colleges have all sorts of free-food opportunities. (I used to eat free vegetarian meals weekly at a Hare Krsna temple. Price of admission: listening to the monk read from the Bhagavad Gita.) Fast food is, of course, a complete no-no on low-budget living. It probably goes without saying, but just in case you haven't: cancel cable, get a cheap phone plan (Ting is excellent if available in your area), and otherwise see how you can squeeze a few dollars out of your bills. On the subject of frugality, I have found no book more enlightening than: Money Secrets of the Amish: Finding True Abundance in Simplicity, Sharing, and Saving" I generally only carry my debit card and a small amount of cash. On payday most of my money goes into a bills account, so I only have enough in the main account for a few days regular spending. This means if I want to buy anything I need to make a transfer from my bills account. If I really need to I can transfer the money instantly this over the phone or the web, but it cuts down greatly on the impulse purchases as I have to go through a process to get hold of the money.  As an aside this approach would probably help if I got mugged or lost the wallet as they wouldn't get much cash or be able to use my card for very long. "What you are describing sounds a lot like the way we handle our household budget.  This is possible, but quite difficult to do with an Excel spreadsheet.  It is much easier to do with dedicated budgeting software designed for this purpose. When choosing personal budgeting software, I've found that the available packages fall in two broad categories: Some packages take what I would call a proactive approach: You enter in your bank account balances, and assign your money into spending categories.  When you deposit your paycheck, you do the same thing: you add this money to your spending categories.  Then when you spend money, you assign it to a spending category, and the software keeps track of your category balances.  At any time, you can see both your bank balances and your spending category balances.  If you need to spend money in a category that doesn't have any more money, you'll need to move money from a different category into that one.  This approach is sometimes called the envelope system, because it resembles a digital version of putting your cash into different envelopes with different purposes.  A few examples of software in this category are You Need a Budget (YNAB), Mvelopes, and EveryDollar. Other packages take more of a reactive approach: You don't bother assigning a job to the money already in your bank account.  Instead, you just enter your monthly income and put together a spending plan.  As you spend money, you assign the transactions to a spending category, and at the end of the month, you can see what you actually spent vs. what your plan was, and try to adjust your next budget accordingly.  Software that takes this approach includes Quicken and Mint.com. I use and recommend the proactive approach, and it sounds from your question like this is the approach that you are looking for.  I've used several different budgeting software packages, and my personal recommendation is for YNAB, the software that we currently use.  I don't want this post to sound too much like a commercial, but I believe it will do everything you are looking for.   One of the great things about the proactive approach, in my opinion, is how credit card accounts are handled.  Since your spending category balances only include real money actually sitting in an account (not projected income for the month), when you spend money out of a category with your credit card, the software deducts the money from the spending category immediately, as it is already spent.  The credit card balance goes negative.  When the credit card bill comes and you pay it, this is handled in the software as an account transfer from your checking account to your credit card account.  The money in the checking account is already set aside for the purpose of paying your credit card bill. Dedicated budgeting software generally has a reconcile feature that makes verifying your bank statements very easy.  You just enter the date of your bank statement and the balance, and then the software shows you a list of the transactions that fall in those dates.  You can check each one against the transactions on the statement, editing the ones that aren't right and adding any that are missing from the software.  After everything checks out, the software marks the transactions as verified, so you can easily see what has cleared and what hasn't. Let me give you an example to clarify, in response to your comment.  This example is specific to YNAB, but other software using the same approach would work in a similar way. Let's say that you have a checking account and a credit card account.  Your checking account, named CHECKING, has $2,000 in it currently.  Your credit card currently has nothing charged on it, because you've just paid your bill and haven't used it yet this billing period.  YNAB reports the balance of your credit card account (we'll call this account CREDITCARD), as $0. Every dollar in CHECKING is assigned to a category.  For example, you've got $200 in ""groceries"", $100 in ""fast food"", $300 in ""rent"", $50 in ""phone"", $500 in ""emergency fund"", etc.  If you add up the balance of all of your categories, you'll get $2,000. Let's say that you've written a check to the grocery store for $100.  When you enter this in YNAB, you tell it the name of the store, the account that you paid with (CHECKING), and the category that the expense belongs to (groceries).  The ""groceries"" category balance will go down from $200 to $100, and the CHECKING account balance will go down from $2,000 to $1,900. Now, let's say that you've spent $10 on fast food with your credit card.  When you enter this in YNAB, you tell it the name of the restaurant, the account that you paid with (CREDITCARD), and the category that the expense belongs to (fast food).  YNAB will lower the ""fast food"" category balance from $100 to $90, and your CREDITCARD account balance will go from $0 to $-10. At this point, if you add up all the category balances, you'll get $1,890.  And if you add up your account balances, you'll also get $1,890, because CHECKING has $1,900 and CREDITCARD has $-10.  If you get your checking account bank statement at this time, the account balance of $1,900 should match the statement and you'll see the payment to the grocery store, assuming the check has cleared.  And if the credit card bill comes now, you'll see the fast food purchase and the balance of $-10. When you write a check to pay this credit card bill, you enter this in YNAB as an account transfer of $10 from CHECKING to CREDITCARD.  This transfer does not affect any of your category balances; they remain the same.  But now your CHECKING account balance is down to $1,890, and CREDITCARD is back to $0. This works just as well whether you have one checking account and one credit card, or 2 checking accounts, 2 savings accounts, and 3 credit cards.  When you want to spend some money, you look at your category balance.  If there is money in there, then the money is available to spend somewhere in one of your accounts.  Then you pick an account you want to pay with, and, looking at the account balance, if there isn't enough money in that account to pay it, you just need to move some money from another account into that one, or pick a different account.  When you pay for an expense with a credit card, the money gets deducted from the category balances immediately, and is no longer available to spend on something else." "The ""hold"" is just placeholder that prevents you from overspending until the transaction is settled. The merchant isn't ""holding"" your money, your bank or card provider is protecting itself from you overdrawing. In general, it takes 1-3 days for a credit transaction to settle. With a credit card, this usually isn't an issue, unless you have a very low credit line or other unusual things going on. With pre-paid and debit cards, it is an issue, since your spending power is contingent upon you having an available balance. I'm a contrarian on this topic, but I don't see any compelling reason to use debit or stored value cards, other than preventing yourself from overspending. I've answered a few other questions in detail in this area, if you're interested." Is your credit card spending on things outside the categories listed in your question? I generally don't put credit card expenditures in their own category of spending because I'm buying things like gas and groceries, etc. I track all spending whether from my checking account (bill autopay) or credit card account as spending in budget categories, and I just transfer money from my checking account to my credit card account to cover anything that was spent there during the previous month. I think this is off topic, but here is a stab: So these are cashless.  It could be a way to smooth out the harsh reality of capitalism (I overproduced my product, I have more capacity than I can sell) and I can trade those good to other capitalists who similarly poorly planned production or capacity. Therefore the market for a system like is limited to businesses that do not plan well.  Business that plan production or capacity to levels they can already sell for cash do not need a private system to offload goods. Alternatives to such a system include: (I don't know how many businesses are really in this over production / over capacity state.  If my assumption that it isn't many is wrong, my answer is garbage.) This is a bartering system with a brokerage.  I think we have historically found that common currencies create more trade and economic activity because the value of the note in your pocket, which is the same type of note in my pocket, is common and understood.  Exchange rates typically slow down trade.  (There are many other reasons to have different currency or notes on a global sale, but the exchange certainly is a hurdle to clear.) This brokerage is essentially adding a new currency (in a grand metaphor).  And that new currency is only spendable on their brokerage, which is of limited use to society as a whole, assuming that society as a whole isn't a participating member of that brokerage. I can't really think of why this type of exchange is better than the current system we have now.  I wouldn't invest in this as a business, or invest in this as a person looking for opportunity. The credits go to the buyers.  TSLA's profit margin does not take into account any emissions credits.  They did receive a nice big loan, and then they paid it back years early + interest.  Currently their sales per square foot is twice of apple, and can increase demand at will.  The federal tax credit to buyers being phased out will most likely be offset by reductions in battery cost when the time comes anyway.  Do you also feel that the Model 3 will not happen?   That car is the reason for the battery factory 'side show'.