Credit cards are convenient and they effortlessly provide a record of every purchase you make. But using a credit card doesn’t feel like spending money. Consequently, it’s easier to overspend with one than it is if you only use cash and checks. Unless you constantly monitor your purchases, there’s no easy way to stay aware of how whether your spending out of control. In a few months, though, Citigroup will introduce a credit card that lets you define a monthly cap for different purchase categories: instant budgeting for credit cards.
Ron Lieber, one of my favorite financial columnists, wrote a piece in the New York Times today about inControl, a service already available in the UK that should be introduced in the US soon. The system ultimately will let you define how much you can spend on different kinds of purchases; if you exceed the set amount before the month is over, your purchase is declined. You’ll also be able to set it up so that you’re alerted in the event that a purchase is made outside the US or online. This feature will make it easier to detect fraudulent charges quickly.
This sounds like a great idea – but what if you don’t discover that you’ve hit your limit until after you’ve had a nice restaurant meal? inControl allows you to override the cap by phone (and eventually via a mobile app) so that you’re not stuck washing dishes.
The system isn’t foolproof, but it’s a step in the right direction. It’s hard to believe that it’s taken this long for someone to come up with this idea. Properly executed, it should let you retain the benefits of making purchases by credit card without overshooting your budget every month. We can only hope that lots of banks follow Citigroup’s lead; this could help a lot of people manage their spending more effectively.