Reducing card use can be easier said than done. Worksheet from U.S. consumer bureau provides one simple blueprint
Reading about ways to cut credit card spending is one thing. Remembering the rules during a busy day is something else.
On Monday the U.S. Consumer Financial Protection Bureau published a worksheet for consumers to build healthier habits of credit card use. Internalizing simple rules of thumb can be an effective way to control spending, research has found.“Consumers can use this worksheet to develop rules about their credit card spending that are based on their own personal financial situations, and commit to taking action,” the agency said in a statement.
By avoiding cards on purchases under $20 consumers can trim spending that builds card debt. The rule even has a catchphrase: “Don’t swipe the small stuff.” Since most consumers feel comfortable carrying up to $20 in cash, it should be possible to pay for relatively small items without adding to a revolving balance.
In case that is easier said than done, the worksheet walks you through an analysis of card spending to build specific tactics. By looking at the types of small purchases and the time of day, patterns can emerge that help control card use.
For example, if coffee is the culprit in small swipes, you can resolve to pay cash for the morning jolt and plan ahead. Other resolutions include paying cash once a month for taxis or gas, or going into cash-only mode after 8 p.m. on weekends.
Simple guidelines or rules of thumb “are a promising strategy to help simplify day-to-day decisions, such as managing credit card debt,” the CFPB said in a statement announcing the worksheet.
Dr. Barbara O’Neill, a finance professor at Rutgers Cooperative Extension in New Jersey, agreed that simple guidelines can be helpful. A better strategy with credit cards, however, is to pay the balance in full every month, or as much as possible, she said.
“For a person who has discipline and resources to set cash aside, they want to charge things in order to get rewards points,” O’Neill said.
See related:Six rules of thumb for smart credit card habits