Ask folks creating a budget to list the categories they intend to use, and they’re almost certain to include one category that should NOT be on the list.

That category doesn’t usually even have a single name, despite the fact that it could eat up anywhere from hundreds to thousands of dollars each month.

So what is it?

The one to drop

The category to drop is probably disguised as one or more of these line items:

Visa $350
Mastercard $225
American Express $980
Discover $465
MyFavoriteStoreCard $200

That’s right. Your credit cards are the one thing to drop from your budget like a hot potato. Bear with me if you just rolled your eyes at not using credit cards.

An important distinction

I’m not saying you shouldn’t use credit cards as a way to pay for things — just like I wouldn’t say you shouldn’t use cash or checks.

(Although I’d encourage you to get out of debt and stay out of debt if you’re carrying a balance on them, because debt does NOT have to be forever.)

What I am saying is that “credit cards” are not a budget category. That’s like having “hundred dollar bills” or “checks” as a budget category.

Credit cards are a method of payment, not something you’re buying. It’s the things you’re using the cards to buy that should go in your budget. It’s easy to forget what those items even are if they’re wrapped up in a vague category like “Visa”.

An exception

The exception to this, of course, would be if you’re no longer using the credit cards at all as a method of payment. If you’re strictly paying down credit card debt and not charging anything additional to them at all, then it would make sense to have credit cards (or probably more accurately: debt repayment) as a budget category.

See the difference

Dropping the “credit card” category from your budget allows you to plan ahead for the things you want and need. It also makes you think and pay a little bit attention more, which is a good thing.

And when it comes to your money, generally the more attention you pay to what you’re doing, the better off you are. So add the types of items you’re actually buying to your budget. You’ll be amazed at what a difference that makes.

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