What We Mean By Responsible Spending

Chris Bridges, Founder and CEO, VITAL Card Inc.

Traditional credit is a powerful asset for the financially savvy individual. Using your available credit to credit balance correctly each month is a way to make purchases with intention. 

With Credit, How Much Is “Too Much” Spending?

 Many ask “how much credit card debt is too much?” 

When seeking to understand better money management, we believe there is no wrong question. Yet, there is a flaw in the logic behind considering the “acceptable” amount of credit debt. Understanding why this logic is flawed is a first step toward changing your relationship with credit. 

In our view, when a credit cardholder considers credit card transactions  as “debt” rather than transactions made from an available  financial tool, they are approaching credit cards with the wrong kind of mindset.  See some tips for how to change your money mindset.

Changing The Mindset Behind Credit Spending 

Our purpose is to change this mindset to consider credit transactions as “spending” on an available asset line. We believe with the right tools, a credit cardholder can budget available credit lines so as to better suit their needs, in the same way they budget their checking and savings accounts. This is a method that The New York Times called “treating your credit card like cash.”

What Responsible Spending Looks Like

To answer the initial question: “how much credit card spending is too much?,” the answer is: it depends. Forbes Advisor notes that healthy credit habits depend on the cardholder’s financial situation.

 In Summer 2022, Experian research found that the average credit debt for the American consumer was $5,221. Depending on the financial situation, this could be a large debt, or it could be an average monthly spend. 

Responsible spending happens when the cardholder is acutely aware of how they are leveraging their credit accounts to their financial needs.

The responsible spender takes into account their budget, the perks of using a credit card over a bank card, and the long term versus short term benefit of using credit to make a transaction. They budget to be able to pay back balances within a goal-seeking time frame, to reap rewards, and avoid interest. 

Be empowered knowing that you can  have all the control in how credit will affect your life. All you need is a perspective for knowing what credit means to your financial goals, and what benefits using it will bring to your long term financial aspirations. 

Why It Matters 

Forbes Advisor explained that keeping a small, revolving activity on credit accounts is good for your credit score. As you show credit lenders responsible activity, you qualify for greater credit limits, better loan rate negotiation opportunities and so forth. See more from Time magazine’s “Next Advisor”.

We can see that credit is an asset for the savvy spender. VITAL aims to take that natural asset a step further for our community members.

How VITAL Supports You

VITAL has taken steps to make credit cards accessible for everyone. For example, when going through application approvals, VITAL Credit Scoring goes beyond traditional credit models to look at banking history data. VITAL will use this information to make approvals informed by the thousands of little data points many other banks and credit companies leave behind in loan application reviews. 

Rewards For Responsible Spending 

Woven into the VITAL framework are rewards for the responsible spender. Every VITAL transaction earns 1.5% cash back. There are also many additional opportunities to use our unique referral rewards programs to turn credit cash rewards into a passive income opportunity. 

It may not seem that 1.5% cash back is a large sum of money. Yet, consider what happens when you make many transactions per month on your credit card, the same way that you would with a bank card. You would be spending your money the same as you normally would, but making the terminal transactions with a VITAL Card instead of a debit card. As you do this, you start to put money back into your bank account. 

So, within a quarterly period, let’s say your average spend is $3,000 dollars. At 1.5% cash back per transaction, for your entire time as a cardholder, you will earn $45 in cash back. Do that each quarter, and you’ve earned approximately $180 in cash back that year. 

Slow Passive Income 

By slowly putting a small amount of money back into your account each year, you could be paying off goals gradually. That extra $180 may pay for a class subscription service, or something you normally wouldn’t have budgeted for. Passive income opportunities, according to investment experts such as GoodEgg, also shield your finances from upsets such as job loss or sudden rate hikes in regular expenses.

Nothing about your spending habits would change to take advantage of this program.  You still delegate funds from your bank account to pay your credit balance off each month. The only thing that changes is the card you swipe at the pay terminal. 

This is a slow-burn but intentional path to passive income. Our other rewards programs, such as referral rewards, make it possible for you to leverage a low-effort means of pulling in even more passive income opportunities. 

Transforming The Credit Experience 

VITAL Card aims to inform the cardholder’s experience. With the right mindset, and cutting-edge digital tools to track all finances, a VITAL cardholder can take back control of their spending. By doing this, we meet the VITAL community member halfway in their financial journey and provide support so that they know the power they hold as the credit consumer, and can have the best relationship with money possible.