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9 Ways to Reduce Your Credit Card Usage

Don't let credit cards rule you. Control your credit card usage with these quick tips.

Justin Cupler

Contributing Writer at Tally

August 3, 2021

Credit cards offer many perks, including reward points, cash back, special discounts and more. However, they can also be a catalyst for excessive debt, as it's easy to swipe the card and think, "I'll pay that off later." 

The problem is, if you forget or are unable to pay off that charge, and the next one and every one after that, you can end up in a financial bind. And the worst part is, a financial bind with credit cards usually involves interest rates in the high teens or higher. 

You can get this under control by reducing your credit card usage, but where do you start? Below, we'll show you how to reduce credit card usage with nine helpful tips. Plus, we'll cover how excessive credit card use can hurt you. 

The negative impacts of high credit card usage

A big downside to credit cards is they offer the ability to overspend, which can cause serious financial stress that can impact other parts of your life. 

Here, we'll cover some of the negative impacts high credit card use can have on you and your finances. 

Increased credit utilization rate

Cutting back your credit card usage can help you avoid getting too deep into debt and potentially harming your FICO credit score with a high credit utilization ratio. The latter is your total credit card balances relative to your total credit limit. 

For example, if you have two credit cards with $2,500 limits and $1,000 charged on each, you'd have a total credit card balance of $2,000 and a total credit limit of $5,000. To get your overall credit utilization rate, divide the balances by the credit limit and multiply the result by 100 to express it as a percentage. In our example, you'd have a 40% credit utilization rate ($2,000 / $5,000 = 0.40 x 100 = 40%).

Credit utilization makes up 30% of your credit score in the FICO credit scoring model, making it the second most important factor after payment history. Ideally, you'll want to maintain a credit utilization rate of 30% or lower. If your credit utilization ratio exceeds 30%, you may start seeing credit score decreases.

High interest charges

Your credit card's interest rate applies to the total balance on the credit card during the current billing cycle. If you struggle with credit card overuse, the interest charges can add up quickly.

For example, if you rack up $1,000 in changes on a credit card with a 25% interest rate, you could pay up to $20.83 per month in interest, according to Bankrate's credit card calculator

Too many credit card payments to manage

It’s not always about how much money you charge. Sometimes it’s about how many cards you use. If you tend to use more than one credit card, you will have multiple monthly credit card payments. A few cards may be manageable, but if you’re frequently opening a new credit card, you may find you have too many monthly payments to manage, which could result in a missed payment. 

In the best case, you catch the missed payment within 30 days of the due date, so all you'll get is a late payment fee. However, if you go beyond 30 days after the due date, the credit card company can put a late payment on your TransUnion, Experian and Equifax credit reports. 

This late payment mark on your credit history can quickly turn a good credit score into bad credit, as payment history makes up 35% of the FICO scoring model

How to reduce credit card usage

If you find you're struggling to reduce how often you use your credit card, here are some tips to make it easier to limit. 

1. Create a budget

Budgeting is a cure-all for many personal finance issues, including overspending on a credit card. Find the budgeting method that works best for you — the envelope method, zero-based budgeting, the 50/30/20 budget, etc. — and create a monthly budget. 

By sticking to your budget, you'll never spend more on your credit card than you can afford. But this does require a commitment to the plan, as it's completely self-regulated. 

2. Limit unnecessary spending

Tied in with the budgeting process, another great way to reduce credit card use is to limit your opportunities to use it. For example, if you frequently eat takeout for lunch, start packing your lunch instead. If you're going out for drinks after work multiple days per week, scale it back to once per week. 

These limitations on your actions can help reduce the number of opportunities to swipe your credit card. 

3. Tie credit card usage to your available cash

In some cases, credit card use can be beneficial, such as when you're loading up on reward points and cash back. You can still enjoy these perks without overusing your credit card by tying your credit card use to your available cash. 

Keeping your credit card balance at or below your amount of liquid cash means you can afford to pay the credit card off each month. This helps you avoid interest charges and a large balance.

4. Switch to a cash-only system

A more extreme way to use your available cash to limit credit card use is to switch from plastic to cash. Each week, withdraw all the cash you need to get by. Leave the credit card behind and pay cash for everything that accepts cash payments. 

This not only limits credit card spending, but it makes tracking your spending easier because you can physically watch the amount of cash shrink in your wallet or purse.

5. Set a balance alert

Many credit card companies allow you to set a balance alert, which will contact you via text, email, phone call or push notification when you're near or at a certain balance. 

Set a number that you're comfortable putting on your credit card each month using your budget. Then, log on to your credit card account online or in the mobile app and set a balance alert for that amount. 

Once that alert hits, remove the card from your wallet or purse and leave it at home. 

6. Set a hard spending limit

Like balance alerts, some credit card issuers also allow you to set hard spending limits. Once you reach that limit, the card will no longer accept new credit card charges. 

If you're struggling to limit your credit card use, you can log on to your credit card account via the internet or mobile app and set this limit. Just remember that once you reach this limit, the credit card will decline all future transactions until the next month. 

7. Ask for a credit limit reduction

A high credit limit is an invitation for some people to overspend, and you can eliminate this by reducing your credit limit. Contact the credit card company and ask them to reduce your credit card limit to an amount you're comfortable with. 

The big downside to this is by reducing your available credit limit, you will increase your credit utilization ratio. This could result in a credit score decrease once the credit line reduction hits your credit report. 

8. Lock away the credit cards

If you're really struggling to curtail your credit card spending, you can lock away your credit cards in a drawer or a fireproof safe. 

You can also freeze the cards — literally — in a block of ice to prevent you from accessing it.

Don't forget to also delete the card from all your favorite online shopping sites or your browser if it saves your credit card information. 

If you fear you'll unlock the drawer or safe and use the card, you can give the key or combination to a close friend or family member and ask them only to open it in extreme emergencies. 

9. Close some credit card accounts

If you want to eliminate the chance of overspending on multiple credit cards or juggling several monthly payments, you can go as far as closing all but a few of your credit card accounts. Call the credit card company and explain that you'd like to close the account. Keep in mind, though, you usually can't close a credit card account with a balance on it. 

To close a card with a balance on it, you can consider doing a balance transfer to move that balance to a credit card you plan to keep open. Some cards have a 0% APR promotional rate for balance transfers. Make sure to account for the typical 3% to 5% balance transfer fee when considering this option. 

When deciding what cards to close, look at their interest rates, annual fees, credit limits, reward programs and other perks to decide which cards are the most beneficial to keep open. 

After closing the account, destroy the credit card by cutting it up or running it through a credit card shredder. 

A downside to closing accounts is that this lowers your available credit, which can increase your credit utilization rate. It can also negatively impact your length of credit history, which accounts for 15% of your FICO score, if you've had the credit card for quite awhile.

To help protect your length of credit history, close your youngest accounts first and only close your oldest accounts as a last resort. You can see how long each account’s been open on your credit report. 

Streamline your finances by reducing credit card usage

Credit cards have their benefits, but they can also lead you down a path of insurmountable debt if your usage gets out of control. When trying to sort out how to reduce credit card usage, these tips will put you on the right path: 

  • Creating a budget

  • Limiting frivolous spending

  • Tying credit card use to your available cash

  • Switching to an all-cash system

  • Setting

    balance alerts

  • Setting spending limits

  • Reducing your

    credit limits

  • Locking away the card

  • Closing some

    credit card accounts

If you're still struggling with your credit card debt, Tally can help with its credit card debt repayment app. The Tally app manages all your credit card payments, so you make only one payment per month to Tally. It also includes a lower-interest line of credit1 so you can save on interest fees and pay down higher-interest debt. 

1To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate.