Keep all monthly expenses on one credit card
All monthly expense that can be paid by credit card without a penalty should be kept on one credit card. And that card should not be used for anything else.
Why companies love subscription revenue
Monthly subscription revenue is great for businesses because the installment amounts are relatively small and people get used to them – this makes them “sticky” in part because people don’t have to decide each month if they want to make a purchase. It just happens. In the case of a typical consumer, these expenses are often paid by credit card and often by whatever credit card that person uses as their main card.
Unfortunately, this means that monthly expenses often end up hidden among all the other transactions you do each month and you probably don’t really know what your expenses are. As long as your credit card statement is lower than the amount of money you can afford to pay, you’re good, right? For several years, I would always think “Well, as long as we spend less than $X per month, we’re fine. We can still save some money each month if we keep our expenses below that.”
That’s the wrong way of thinking. It sets you up to committing a large portion of your earnings to spending and any time there is an unexpected expense, it is more of a shock to your budget. Towards the end of the month, you reach your usual threshold, and boom, flat tire, hail storm, annual life insurance premium is due, etc., and blows a giant hole in your savings goal.
Get an easy clear view
Write down on a piece of paper what you think your monthly expenses are. I’m talking utility bills, software subscriptions, video streaming, phones, cable tv, etc. Not rent or mortgage or car payments. Once you write down what you think those amounts are, go scrutinize your credit card statement(s) and see how close you are. Maybe you hit it on the dot (great!) or maybe you just found you’re spending more than you thought.
Move all your monthly expenses to one credit card that is only used for monthly expenses. This way you can see your 3-10 charges per month very clearly. You can look at what your statement balance was each month. You’ll easily know exactly how much you are paying on autopilot.
When it comes time to review your expenses and shop for better deals or maybe cut a subscription to boost your savings, this makes your life easy.
Reduces credit score risk
True story. I stopped using a credit card and forgot that I had a monthly razor subscription on it. I didn’t close the card. I just stopped using it. While out of sight and out of mind, there was a $3 charge that I did not see. It was four months before I noticed and by then it had racked up late fees and interest charges. When I saw this, I called the bank immediately to try to explain the situation and pay the card off. They wouldn’t even talk to me. They forwarded my call to their collection agency. I paid it off immediately but my score still showed a 90 day past due debt which trashed my otherwise perfect credit history.
I then signed up for credit monitoring, disputed the blemish as being unfair, and spent a lot of time talking to the bank and credit agencies to get it removed. “You’re treating me like a deadbeat. It’s not like I wracked up thousands of dollars at the mall and refused to pay. It was a pack of razor blades.”
They ultimately did remove this from my credit report and I am back to perfect credit. But that was an inordinate amount of stress and frustration (we were about to buy another house).
That would not have happened if I kept all monthly expenses on one card that was used only for that purpose. This technique is especially useful if you are doing any sort of churn and burn strategy to get credit card promos. You don’t want to have to setup automatic payments every time you switch cards. Just leave them on one card and churn and burn on your non-monthly expenses.