Using debit cards to minimise spending

A year ago we switched from credit cards to debit cards for our monthly spending and I’m pretty sure we’re wealthier for it. Credit cards may offer attractive introductory offers, but I found we spent more money when we used them.

We tried three different credit cards (Tesco, Amex and Lloyds Bank) and I got frustrated with the lag between spending money and when it showed up in our account. It took at least two days for transactions to appear, which was worse over the weekend. If we had an expensive Saturday, it would be Tuesday or Wednesday before we knew what we spent.

In theory this shouldn’t be a problem. I could either pay attention to our receipts or operate in a mental state that’s two days behind reality. But I really struggled with that. In practice, we tended to spend more money because I wasn’t sure where we stood.

By contrast, the new breed of challenger banks (Monzo, Starling, etc.) provide instant feedback on debit card spending. My phone buzzes in my pocket at exactly the same time I wave my card over the reader. This means I always know exactly how much we’ve spent and we can enter “lock down mode” much earlier if our spending has got away from us.

The other problem with credit cards is psychological. Our budget allows us to spend about £1,600 each month (excluding direct debits). If we’re using a credit card and have £200 left to spend, our balance will be £1,400. Somehow this seems less worrying than if we use debit cards and our balance shows £200. Approach zero is scarier than approaching an arbitrary ceiling of £1,600 and it seems to affect our spending patterns.

It’s hard to prove this saved more money than we might have earned through cash back / miles, but we seem to be better at sticking to our limits.

If you have any tips about how I can better manage my spending on credit cards, let me know in the comments.

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