Why you should put almost all of your expenses on a credit card, but don't go crazy
There are certain expenses you generally can't charge on a credit card, like your rent or mortgage payment. And there are also expenses you can charge on a credit card, but shouldn't – for example, school tuition, where you'll generally be hit with a surcharge for going that route. But otherwise, it pays to put your other monthly and one-off expenses (like vacations) on your credit cards. Here's why.
1. You'll score more cash back
The great thing about credit cards is that they reward you for making purchases. The more items you charge, the more cash back you can accrue. So it's especially worthwhile to charge expenses that offer this perk. For example, some of the best cash back credit cards give you 2x or 3x reward points for gas fill-ups, restaurant meals, or other specific purchases.
2. You can better track your spending
When you pay for some of your expenses in cash, it can be difficult to remember how much you're spending in each category from week to week. The great thing about putting most of your expenses on credit cards is that you'll have an easy way to track your spending.
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Not sure how much you plunked down on entertainment last week? Just check your credit card statement. Keeping tabs on your spending could not only help you avoid going overboard, but also make it easier for you to set up and stick to a budget.
3. You can build credit
The more you use your credit cards, the more opportunity you'll have to build credit. When you pay for purchases in cash, there's no record of them, whereas your credit card payments are recorded on your credit report. And if you're timely with those payments, your credit score will rise over time.
How to use your credit cards wisely
Charging most of your expenses on credit cards is a good idea in theory – but it can also backfire. If you charge up too much of a storm, you may not manage to pay your credit card bills in full by the time they come due. That means you'll risk racking up costly interest charges and falling behind on your payments, which would hurt your credit score instead of helping it.
To avoid that, set up a budget to follow so you know how much you can afford to spend in specific categories – and how much you can afford to spend on a monthly basis. At the same time, make a point to check your credit card balances once a week. That way, you'll have an opportunity to cut back on spending if you see your balances creeping up toward an uncomfortably high level.
It's never a good idea to overspend on your credit cards and land yourself in debt as a result. But if you can manage your spending wisely, then putting most of your bills on your credit cards could help you score more cash back, better manage your money, and establish a credit history that buys you more affordable borrowing opportunities down the line.
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