Sunday, July 1, 2012

Credit Card Expenses YTD 2012

Some of the benefits of budgeting is that you can get a really good look at how your expenses shape up year after year.  Are your consumer habits changing?  Maybe you didn't realize that eating out every day rather than every week was having that big of an impact.  Taking the time to check with a budget can be really helpful.  I am going to take a look at my records for the first half of 2012.

At first glance, it looks I did a worse job at managing my reward optimization.  For those of you have been following my blog for a while, you'll know that I love to optimize my cash back and have a portfolio of credit cards to get the maximum cash back by using the card which gives the highest return for an expense.  For example, these next three months Chase has restaurants in their 5% cash back program so you can be sure that I will be using my Freedom card over my Citi Forward card which only returns 4.2%.  It's a small difference in that instance, but most of the time the difference is more between 5% and 1% cash back.  Anyway, for the first half of 2011, my rate of return on my credit cards was only 1.8% compared to last year's first half rate at 2.7%.

The effect was due to both lower reward dollars and higher expenses.  I bought my plane ticket to Hong Kong in March this year to visit in May whereas last time I visited in December 2010.  Also, looking more closely, I seemed to have been using my Discover card for fewer expenses in part due to higher utilization of a few newer cards.  If you remember from my 2011 spending in review post, you would know that Discover had the highest cash back rate out of all my cards.  Unfortunately, since Discover is a 5% rotating cash back program, the categories available probably did not fit my expenditure needs and this ultimately led to lower reward dollars.

How do my credit card expenses look over time?  I've posted a chart below to show you.

This shows how my expenses this year compared to last.  You can see that last year had a much smoother ramp up and that was partially due to a few different factors.  My plane ticket in March certainly sticks out in this chart.  January was exceptionally high this year because of a pricey gift I bought as well.  Also last year in June, I was able to put my housing expenses on my credit card while this year, I have had to pay for it through an electronic bank transfer instead.  So just how well do my credit card expenses track my overall expenses for this year?  I made a chart for that too.

Overall it looks like a pretty good indicator.  If I bought everything with a credit card, the lines should completely overlap.  The discrepancy in March probably had to do with buying more food with cash at food trucks when my brother visited me for his spring break.  I generally try to buy everything with my card which is why January, February, and May are pretty close to equal.  The huge jump in June is what I mentioned earlier with my housing expenses paid directly out of my bank account rather than through a credit card and in April, I had to put down a deposit through a bank account transfer as well.

Looking at the first chart, it is pretty easy to identify what was different comparing this year to last year.  Since I keep my expenses low, large purchases like plane tickets really stick out.  Taking them out of the equation shows that I have been able to manage my expenses fairly well.  Having a budget can help paint a comprehensive picture of your spending habits and make you aware of overall trends you might not notice day-to-day.  I certainly realize that I forget a lot about where my money goes if I don't budget and take a look at the bigger picture every once in a while.  Check out my posts under the Bugeting label if you are interested in reading more about it.


  1. Hi, I have a question. When should I stop using my credit card for good? Personally, I think using credit cards is a bad idea, especially in this economy where most people are getting laid off in their jobs and can't pay their mortgages and using a credit card can really rake up debts. So fill me in, I'm interested to know.

    Darwin Feldman
    Retirement Planner

  2. I don't think there is a cliff where you should stop using your credit card and never touch one again. If you have the maturity and discipline to treat your credit card like cash, then I think you should always use your credit card because of the cash back bonus (assuming that you also remember to pay your monthly statement on time).

    However, if you don't fall into that category, you may be better off just using cash all the time instead. I know a lot of people who just use cash and end up spending less because of it which is great.

    Of course, you will end up paying an indirect cost through higher rates on loans you may need to take later on if your credit score is poorly impacted from a lack of reliable credit history so you have to weigh all these factors before making such a decision.