Credit cards are a boon for most as they help with liquidity and give you the ability to pay back within 30 to 45 days, usually with no interest. But problems arise when you start to pay less than the total outstanding. The accrued interest compounds rapidly and could lead to a debt trap. That is why budgeting becomes important when using credit cards. Proper budgeting can help ensure you never pay interest on your credit card bills. Below are some budgeting and credit card spending strategies that you may find useful.
The envelope method
The envelope method is a classic budgeting technique that can be adapted for credit card spending. First, categorise your expenses into different categories such as groceries, utilities, entertainment, and so on. Next, determine a fixed amount you can afford to spend in each category based on your income and financial obligations. Label envelopes with each expense category and note the allocated amount on each one.
While you don’t need to place actual cash in these envelopes, you should track your spending within each category. When making purchases with your credit card, record the amount spent for each category either by noting it down or using a budgeting app. At the beginning of each month, review and adjust the allocated amounts in each envelope as needed. This method helps you visualise your spending limits and ensures that you don’t overspend in any category. It also encourages you to be mindful of your purchases and stick to a predetermined budget.
| Step | Description |
| Categorise expenses | List your spending categories (groceries, utilities, entertainment, etc.) |
| Set spending limits | Allocate a fixed amount you can afford to spend in each category. |
| Prepare envelopes | Label envelopes with each expense category (for visualisation only, no actual cash is used). |
| Use your credit card | When making purchases in a category, use your credit card. Mentally deduct the amount from the corresponding envelope or use a budgeting app. |
| Track spending | Note down the amount spent on the envelope (to keep track). |
Zero-based budgeting method
Zero-based budgeting is a method where you allocate every rupee of your income towards expenses and savings, leaving no money unaccounted for. First, calculate your monthly income from all sources. Next, make a comprehensive list of all your monthly expenses, including fixed expenses (rent, utilities, loan payments) and variable expenses (groceries, entertainment, transportation).
Assign every rupee of your income to specific expenses and savings goals, ensuring that your total expenses do not exceed your income. When making purchases, use your credit card for the allocated expenses. At the end of each month, review your spending and make adjustments to your budget for the next month based on your actual expenses. This method helps you stay on top of your spending by ensuring that every rupee has a specific purpose. It also encourages you to prioritise your expenses and make conscious decisions about where your money goes.
Choosing the best card
Selecting the right credit card is crucial, as it can significantly impact your financial well-being. With numerous options available, it’s essential to consider factors such as interest rates, fees, rewards, and credit limits to find the card that best suits your needs.
One card that stands out is the IndusInd Bank Platinum RuPay Credit Card, which offers the advantage of zero joining or annual fees, making it a cost-effective choice for responsible spenders. You also earn two reward points for every ₹100 you spend through UPI. The best part? You can apply for this card right away through a 100% digital application process.
Conclusion
Proper budgeting strategies, such as the envelope method and zero-based budgeting, help control spending and ensure timely repayment of the total outstanding balance. Selecting the right credit card further contributes to responsible credit card usage. By combining wise budgeting practices with a suitable credit card, individuals can maintain financial stability and avoid the pitfalls of excessive debt.
