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I use credit cards for most of my spending. My issuer allows me to create "additional cards", which can have a spending limit (can be changed more easily and quickly than credit limit). I can set the spending limit to how much I want to spend in a month. When the limit is used up, the additional card stops working. However, the main card is still there in case I need to spend on some emergency.

This works great but there is one problem: The limit resets monthly and big purchases are annoying to plan. Unspent limit also doesn't "accrue", so I can't save up for a big vacation this way.

Is there an alternative to using additional card spending limit for imposing a hard budget?

2 Answers 2

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Use a debit card on a separate account, or equivalently use a preloaded/reloadable credit card the difference is mostly what bank networks the transaction flows through). Refill that at appropriate intervals, and only at appropriate intervals. That gives you a hard stop when there isn't enough on deposit for the transaction.

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I always leave my normal limit in place on my credit card. When I need a larger amount of money in a given month - no matter whether it's a single purchase like a new computer or an occasion where I'll be spending a lot over a period of days, like going on an expensive vacation - I transfer this large amount from wherever it is (usually in my short-term-savings account) to the credit card account to create a positive balance. This gets "added" to the limit in the sense that you only start getting into the limit once you're in a negative balance, and everything works just fine.

I recently heard somewhere that not all banks allow positive balance on a credit card account. Mine do, and I find it convenient both for the "increase the limit" use case and for avoiding interest on my second card which has no "automatically repay in full every month" option. I just pre-charge it and because it's the second one, it takes a long time to use up the positive balance.

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  • The downside of prepaid cards (or prepaying cards) is that you generally don't earn interest on those deposits. Like everything else it's a tradeoff.
    – keshlam
    Oct 17, 2023 at 14:56
  • @keshlam I'm not aware of any kind of account intended for frequent, easy payments, that earns interest, especially not a credit card account. Sure, the large amount won't earn interest in the days it's parked in the credit card account, but that should only happen a few days before actually spending the money for the planned big purchase. Also, if one's financial situation is such that the interest on X euros/dollars/whatever makes a significant difference, then one probably shouldn't be spending X on a single purchase.
    – rumtscho
    Oct 17, 2023 at 15:02
  • Are you saying that you spend up to the credit limit of your credit card, and temporarily increase it by creating a positive balance? Oct 17, 2023 at 18:53
  • @gomennathan let's say my credit card has a limit of 1500 euro, and I start the month with a balance of zero. I can either 1) transfer 1000 euro to the card first, giving me a balance of +1000, which allows me to spend up to 2500 that month, or 2) start spending until I'm at, say, -1200 and have only 300 left in the limit. If I manually transfer 1000 again during the month (separately from the automatic pay-off that's set up for the end of the month) I'm at -200 and can spend 1300. My bank allows any combination as long as I don't fall below -1500 at any point in time.
    – rumtscho
    Oct 17, 2023 at 19:29
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    @gomennathan no, I don't think it will work. Apparently, I misread your situation. In my case, I have set my limit close to my real monthly expenditures. I'm indeed not set up for a "I need 50k within 2 hours" situation.
    – rumtscho
    Oct 17, 2023 at 19:49

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