Gather Little by Little

What is a credit card fast?

Pretty much what it sounds like: refusing to use one’s credit card for a period of time – a week, a month, three months, etc. Another variation of the credit card fast is to continue using credit cards, but restrict usage only to certain essential purchases such as gas, groceries or airfare, but not using the card for eating out, entertainment, clothes, electronics or any other kind of shopping.

I wrote about this idea once before on GLBL, indicating that we undertake a credit card fast on occasion. It usually works out best to conduct the fast during the month of February. “February Fast” makes for good alliteration and we choose that month for practical reasons as well: First, this tends to be the time of year when we are still recovering from the expenses incurred from Christmas spending and travel. Secondly, if we happen to qualify for an IRS tax refund, it does not usually arrive until after February and thirdly, February is the shortest month which makes a credit card fast easier to endure.

Why do a credit card fast?

The strength of a credit card fast is that if you stick to it, it can be effective in removing nearly all but the most pressing discretionary, optional or impulse spending from your budget budget. It really cuts out the fat because for most people, one of the primary catalysts for budget overspending is credit card usage. It has been well documented that people who use credit cards nearly always overspend by ten to twenty percent. Therefore, it makes sense that a good way to get a family budget under control is to drop credit card use altogether for a period of time.

Why not cut out cards altogether? Some people have done this, but in contemporary society “credit card cold turkey” is not feasible from a practicality standpoint. Sometimes credit cards are the only way that purchases can be made, people need a credit history and carrying around a large amount of cash is not particularly safe. However, a short term suspension of credit card use can be a great way to get spending  back to manageable levels.

How is a credit card fast carried out?

There is more than one way to get through a month without using one’s credit card, but we have found that the best way is the cash envelope system. Take a regular mail envelope and write a particular budget category on the outside and write down the amount of money that you have designated for that category according to your budget on the outside of the envelope. Do this for all of your budget categories that can be paid with cash. Then, when you cash your paycheck or take case from your checking account (if you have payroll direct deposit), put the proper amount of money into each respective envelope.

The amount in each envelope is what you have to spend in that category for the month. When the envelope is empty, you must stop spending . . . which will force you to take more care in spending that money in the first place. And yes, there will be times when you will have to exercise self-discipline, think creatively or just say “no” and stick to it. This exercise will also force you to get an accurate idea of the state of your finances.

Credit card use can mask or hide financial problems until things become a major problem. Limiting yourself to cash-only for a week, a month or longer will expose problems in your budget – if there are any.

The reward

And the reward? If you do a credit card fast, the reward is a smaller or even non-existent credit card balance to pay at the end of the month. Which then makes you more aware of the level of your spending or over-spending in the next month.

A few final thoughts:

There is something that is way too easy about swiping plastic over the painful prying of bills out of the wallet. When we use a credit card, “just a little more” does not put any purchase out of reach: Extra taxes? Put it on the card. Add-ons and accessories? A big tip? Hidden fees? Eh, just put it on the card.

I must confess, we use a credit card for most of our purchases, mostly because of the credit card rewards and because it is convenient. We usually keep things under control, but it is true that we have months where we overspend. While, I cannot lay the blame solely on the card, if I had to dig tens and fives and ones out of my pocket for every purchase, you can be certain that the “economy” would be far more disappointed at the volume of my spending.