I got my first credit card before the internet era began, before credit-card issuers had websites that could be used to check balances and make payments. Back then, you could easily get in trouble by charging purchases on your credit card while simultaneously spending the money in your credit union‘s checking account. If you didn’t carefully keep your credit-card receipts (and I didn’t), you would be in for a shock when the monthly credit-card bill arrived in the mail.
Here’s what could happen: Over the course of a month, I wrote checks for the usual rent and utility bills (remember, this was before the internet) and made some withdrawals from the old neighborhood ATM for walking-around money. (Being careful not to pay ATM fees, of course.) I also ate a few meals at restaurants, had some drinks at the local adult-beverage emporium, got groceries, saw a movie, maybe bought some clothes, picked up a few books or magazines, bought a tankful of gas for the car, ordered something from a catalog, maybe paid for a car repair or perhaps a large purchase or two — and I put all these purchases and more on the card and then … WHAM! … the U.S. Postal Service delivered the credit-card statement. I opened it and found the total due on the credit card bill exceeded what was left in my checking account.
Sure, I could have avoided that if I had kept all the receipts and maintained a running day-by-day total of the credit-card balance. And that’s a great idea. Maybe staple the receipts to a calendar or tack them to a bulletin board. Seeing the total climbing into the danger zone is a warning to stop spending money you haven’t got. And yes, even in those pre-internet days, there was an “800” number I could call to check on the balance. But the problem was, I didn’t keep track. Be just a little careless and there was soon more credit-card debt than I could handle by properly paying off the balance in full each month.
Now, in our internet-everywhere age, you have another option. Instead of adding up the receipts to a running total, you can just log-on to your credit card’s website and see what you’ve spent. While you’re there, click the “Pay” button (certainly, you’ve already linked the card’s payment system to your checking account) and pay off the total balance. Do this every two weeks, or even every week, and you will never be surprised by a terrible total on your end-of-the-month statement.
As you’re paying off the credit card, you’re also reducing the amount of money in your checking account — which should send a “current balance” signal to your brain and cause you to be careful with whatever dollars you have left. Thus, making multiple payments per month does two things: it eliminates the chance of a surprisingly large balance on the credit card bill and it prevents you from spending money in the checking account that should go to paying off the credit-card bill.
Another possible advantage: A low balance on your credit cards might help improve your credit rating.
A word about “using the bank’s money”: Years ago, one of the touted “advantages” of using credit cards was that by using a credit card for all your normal purchases and then paying it off as late as possible each month you were “using the bank’s money” instead of your own. The idea being, you could keep as much of your money as possible in an interest-earning account before using it to pay credit-card debt. You could get maybe an extra 20 days each month earning interest and that was “free money” for you to keep. Nothing wrong with this approach, if you’re careful enough to do it correctly. It may not be as worthwhile during a time of low-to-zero interest rates on checking and savings accounts. However, there may be some benefit if it helps you keep your average daily balance at a level where you don’t have to pay a monthly fee for your checking account.
