Using Debit Cards to Develop Spending Self-Discipline

Debit cards are issued by banks and, in most cases, look and spend exactly like a credit card. The only difference is that the debit card does not advance you any credit. In fact, using a debit card is much like writing a check without the paper. Any amount you spend is deducted directly from your checking account virtually immediately, depending on how the transaction is actually processed. There is no bill to pay at the end of the month, no accumulating interest charges and no membership fees.

If you do not have the funds to cover the transaction the debit card will return a denied transaction. Banks often place a limit on the size of any single transaction that may be processed in any given day ranging from $500 to $2,000. If you know you will be using your debit card in excess of your limit you must get a pre-authorization from your bank that normally lasts for 24 hours only. Some banks charge a fee for debit transactions but not for charge transactions.

There are several products on the market and they go by several different names. While the most common remains the debit card, your bank might issue a Check Card or an Express Card but the different names are no more than a marketing tool to distinguish one bank’s product from another. Additionally, there are several different types of debit cards on the market. Your bank may offer one or more of the following options to you:

  • A Direct Debit Card requires a personal identification number or PIN in order to work. You may use the card at a terminal or Automated Teller Machine (ATM) to draw cash.
  • A Deferred Debit Card combines the basic debit card with a card that looks and acts just like a credit card. When you use the card in an ATM you still must use a PIN to secure cash. If you use the card as a debit card for a store transaction you will also require the use of a PIN to complete the transaction. But if you use the card as a credit card your signature alone is enough to complete the transaction.

Using debit cards to regain control of your financial future is a convenient way to impose a self-discipline on your spending. The beauty of the debit card is that you may only spend what you have. The debit card allows you to make no claim on future dollars, rather, it limits you to spending what is currently in your checking account. Impulse buying is curbed. As you work to learn the discipline of budgeting and spending, the debit card places important briansclub restraints on your ability to overspend. Debit cards offer you the convenience of credit cards but on a pay-as-you-go basis. You always know where you stand and you have no outrageous finance charges that eat into your ability to pay down your debt. Debit cards also provide users with the added convenience of not having to carry extra cash or a checkbook around. The debit card is an adequate substitute for both with the added benefit that the card is protected by a PIN. If lost or stolen, the debit card is harder to use than a checkbook and, unlike cash, is not gone forever.

Debit cards, unfortunately, have a few disadvantages that you should be aware of. For one thing, if you don’t faithfully record your transactions you can easily cause your bank balance to plunge out of control. For the most part, this disadvantage is countered by the ability to access your account balance 24/7 on the internet. You should also request your balance any time you withdraw funds from an ATM. While no interest is charged, often there are heavy use fees associated with a debit card. If, for example, you use a foreign ATM (one not owned by your bank) the bank that owns the ATM may charge a fee of up to $3.00. Often your own bank charges a fee for ATM withdrawals from a foreign ATM as well that match the fee charged by the ATM owner. You could pay up to $6.00 to withdraw a minimum of, say, $20.00. That is a high price to pay for having access to your own funds. You may avoid all fees by only using an ATM owned by your own bank.

Finally, the bank debit card provides no help with credit repair. If you have had credit problems in the past and you are working to rebuild your credit through the responsible use of credit, only the responsible use of a credit card will help. Because the bank issuing the debit card is not issuing credit they do not report transactions to the credit bureaus. There are other solutions that act much like a debit card, for example, a secured credit card, that will help with credit repair. The point is, if you have had credit problems, please do not be misled by the claims of getting a debit card to rebuild your credit.


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