 TITLE: How to Budget Using a Credit Card CONTENT: Pros and Cons of Budgeting With a Credit Card\n---------------------------------------------\nTo get the most out of a credit card, it's important to be vigilant about your credit card spending. With that in mind, there are several advantages to using a credit card as part of your budgeting plan:\n*   **Track purchases on your statement or in your issuer's app.** Credit cards can make expense tracking automatic. Many issuers offer the option to see a breakdown of your monthly spending by category, and checking your daily and weekly spending is much easier with a credit card than noting each purchase by hand or in a spreadsheet. You can put all of your everyday spending on one card so it's easy to see any patterns, or you can assign different credit cards different jobs based on the rewards they offer.\n*   **Set spending maximums.** Since you can check your balance often on a credit card issuer's app or website, it's easy to see when you're approaching a self-imposed spending limit. The trick is not to let your spending get too close to your limit regularly, though, since that could negatively affect your credit scores. For the sake of your scores, consider calculating 30% of your credit limit on the card and making that your max spending limit. Your credit balances affect your credit utilization rate, which is an important factor in your credit scores. Keeping your rate below 30% will help prevent credit score harm, but the lower your rate, the better.\n*   **Make use of credit card rewards.** Another good way to incorporate credit cards into your budget is to use credit only for certain purchases based on reward options. The Capital One SavorOne Cash Rewards Credit Card, for example, offers 3% cash back on dining and entertainment, 3% at grocery stores (excluding superstores like Walmart and Target), 8% cash back on tickets at Vivid Seats through January 2023, 3% on streaming services and 1% everywhere else, so you could use it to pay for meals out and concert tickets if those are two of your biggest budget categories. Then you'd be able to save on those purchases, too, by applying cash back to your statement balance. If you travel often, you could also put either a subset or all of your everyday spending on the Chase Sapphire Preferred® Card, which offers 3 points per dollar spent on dining, 2 points per dollar spent on travel, and 1 point on everything else, plus the option to get 25% more value when redeeming points on the Chase Ultimate Rewards portal. The card comes with a $95 annual fee, so make sure you get enough rewards to justify it.\n*   **Credit cards can help you build credit.** Making on-time payments on a credit card can show lenders and credit scoring models that you know how to responsibly manage debt. A long history of on-time credit card payments can help increase your credit scores and make it easier to qualify for new credit, including car loans and mortgages. If you don't plan on using your credit card to make day-to-day purchases, consider at least using it regularly for small purchases you can pay off right away.\nUsing credit cards to budget also has drawbacks:\n*   **You could have high credit utilization.** As mentioned above, it's important to keep an eye on how much of your credit limit you're using—on each card and across all cards—at any particular time. When you put a lot of charges on your card, even if you plan to pay them all off at the end of the month, you'll be able to keep your credit utilization low by making more than one payment to your balance each month. That can also help prevent your balance from ballooning so large that it becomes overwhelming.\n*   **Carrying a balance can make expense tracking tricky.** Let's say you make a purchase in March and don't pay it off until April. You can decide to include it in your budget for either March or April, but it may be easiest to leave it listed under your March expenses so that your spending behavior each month is as clear as possible. Furthermore, carrying a balance can throw your budget for future months out of whack if you don't properly plan for it. END