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How I treat credit cards like debit cards: The updated envelope system

July 17, 2022
4 min read
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Juggling a mountain of credit cards can be a tough task. You'll want to keep close track of things like spending requirements across all of them, payment due dates and which credit card is the best for each spending category. It can be a lot to handle.

My wife and I each have more than 20 credit cards. With all of these credit cards, it might seem like I could lose track of how much money I'm spending and blow my budget for the month. In order to avoid that problem, I treat my credit cards like debit cards. Let's look at what I mean by that and how it could help you juggle your many credit cards.

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The envelope system — but modernized

(Photo by RonBailey/Getty Images)

I'm not the biggest fan of Dave Ramsey. However, the envelope system for budgeting isn't a bad idea. I've adapted this with a modern twist since I prefer digital approaches to everything and want to use credit cards for my spending. This allows me to earn rewards that I use for travel (I've been to 170 countries and counting).

Instead of an envelope with cash in it, I use two separate checking accounts. For simplicity, let's call them Account A and Account B.

Account A is where I receive money. When my wife and I make deposits, receive our paychecks or sell some old items on eBay, all incoming money goes into this account.

We make our payments from Account B — sort of. Since we use credit cards for all possible spending to earn rewards, I don't want to lose track of how much we've spent during the month across these many credit cards. Every few days, I look at our receipts and recent spending. Then, I move that amount of money from Account A into Account B. In this way, the money is set aside to cover bills we need to pay at the end of the month (things like rent and utility and credit card bills).

Related: Off-the-wall things my family has done to earn more points and miles

A glance at Account A tells us how much money we have left this month. Account B has money that we can't spend (it's not attached to our ATM cards for withdrawals) and is ready to cover our financial obligations for the month. In short, when a bill is due, I pay it from Account B.

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How my credit cards function like debit cards

By moving money into Account B for what we have already spent on our credit cards that month, we know we can pay the credit card bills. We also know how much we have left in Account A.

Debit cards work in a very similar way: They instantly subtract money from the linked checking account and you can't spend what you don't have. (Note: Some banks will allow you to overdraw your account, but that's a different discussion.)

Related: 4 reasons why you shouldn’t use your debit card

By using two checking accounts, I can treat my credit cards like debit cards to avoid overspending. This works for me since I'm personally not able to remember exactly how much we've spent across all of our credit cards throughout the month. Dedicating 15 minutes or so to add it up every few days and transfer that money from Account A to Account B helps me pay bills at the end of the month, knowing the money is there to cover them.

Related: Why a credit card is a smarter choice than a debit card

Bottom line

As you get into the points and miles hobby, juggling numerous credit cards can seem daunting. You use one card at restaurants, another card at supermarkets and a third card for filling up at gas stations. Keeping track of how much you've spent across those cards each month can be tricky and might lead to overspending.

By modernizing the envelope approach and using two checking accounts, you can use your credit cards like debit cards. This ensures the money you've spent is set aside, ready to pay the credit card bills at the end of the month.

A different, more rigid way to prevent overspending is to use the envelope system with prepaid gift cards, which still earns you points and miles.

Featured photo by Olleg/Shutterstock

Featured image by Shutterstock
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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BEST FOR DINING AND GROCERY REWARDS
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

4XEarn 4X Membership Rewards® Points on Restaurants worldwide, including takeout and delivery.
4XEarn 4X Membership Rewards® points at U.S. supermarkets (on up to $25,000 per calendar year in purchases, then 1X).
3XEarn 3X Membership Rewards® points on flights booked directly with airlines or on amextravel.com.
  • Intro Offer
    Earn 60,000 Membership Rewards® points after you spend $4,000 on eligible purchases with your new Card within the first 6 months.

    Earn 60,000 points
  • Annual Fee

    $250
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    670-850
    Excellent/Good

Why We Chose It

There’s a lot to love about the Amex Gold card. It’s been a fan favorite during the pandemic because of its fantastic rewards rate on restaurants (that includes takeout and delivery in the U.S.!) and U.S. supermarkets. If you’re hitting the skies soon, you’ll also earn bonus points on travel. Paired with up to $120 in Uber Cash (for U.S. Uber rides or Uber Eats orders) and up to $120 in annual dining statement credits at eligible partners, there’s no reason that the foodie shouldn’t add this card to their wallet. Enrollment required.

Pros

  • 4x on dining at restaurants and U.S. supermarkets (on the first $25,000 in purchases per calendar year; then 1x).
  • 3x on flights booked directly with the airline or with Amex Travel.
  • Welcome bonus of 60,000 points after spending $4,000 in the first six months.

Cons

  • Weak on travel outside of flights and everyday spending bonus categories.
  • Not as useful for those living outside the U.S.
  • Some may have trouble using Uber/food credits.
  • Few travel perks and protections.