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Because it's more mentally taxing, to a degree that many people couldn't manage. You need to track the credit card balance relative to both your current bank ba
by janef0421 4y ago
Because it's more mentally taxing, to a degree that many people couldn't manage. You need to track the credit card balance relative to both your current bank balance and expected earnings, and then evaluate that every time you consider a purchase.
- gruez 4y agoOkay but realistically don't you do the same thing with a debit card? Or do you frequently get declines at the cash register and have to put stuff back? >You need to track the credit card balance relative to both your current bank balance and expected earnings, and then evaluate that every time you consider a purchase. Keeping track of future expected earnings is only necessary if you want to maximize your spending, but if you want to use your credit card like a debit card it suffices to ensure that sum(bank balance) > sum(credit card balance).
- janef0421 4y agoNo. With a debit card, I can just track my checking account balance, which I can do easily with a home screen widget. With a credit card, I'd have to track the account balance and the amount I spent on the credit card.
- jldugger 4y agoWell, that widget doesn't exactly tell the full story -- if I have 500 bucks in checking on Friday but rent is due on Monday, I cant realistically go out and blow cash on a weekend adventure even if the home screen widget suggests otherwise. Same logic goes for all your expenses. What you need is a forecast of future minimum balance, and current balance is a start, but you still have to do mental accounting for future required expenses banks dont typically mention. But what a charge card does for you is kind of nice though: it converts all the random unpredictable expenses into a single, deferred, interest free lump sum payment. Also: maybe I'm boring but at the monthly level those random expenses smooth out into something more predictable to where I can pencil in average payments every month and be pretty accurate. But when I'm wrong, I have 30 days to figure it out, instead of ... instant pain. The method you describe can work for people, and it did for me when I started grad school. But I've moved on to more complicated tracking. Now that I make 10x what I did back then, annual budget spreadsheets and double entry accounting is kind of required to optimize the tax bills I get these days. And of course, the cash back is nice =)
- janef0421 4y agoI solve that problem by transferring whatever money I will need for expenses into a second account whenever I get paid.
- Ekaros 4y agoI don't think that tracking two numbers is too much more work than one. Just ensure that the other is lower than the first one at the end of the month or what is the relevant period. Then again, it mostly comes to not in general spending more than you earn as regular daily activity.
- janef0421 4y agoIt's not that much cognitive work each time, but it adds up quickly and I have more important things to spend my cognitive energy on.