Debit cards

[abowers]

I just got a deposit from Bank of America's Keep the Change program -- $32.97 for using my debit card. :-)

[sarah]

w no longer have a credit card. I am aware this is a controversial choice. However, itis the right choice for me. I have never had a problem with my logo'd debit card. I can do anything with the debit card that Ican do with a credit card.
When they ask me if I want debit or credit. I say credit. I can use the card either way. The card has a fee attached to it if I use it as a debit card more than four times a month but not if I use it as a credit card.

I do have two accounts a primary checking account that does not have a debit card attached to it and another account with the debit card. The debit account is used primarily for my allowance.

[Broken Arrow]

Nothing wrong with sticking with debit, sarah. As you mentioned, it's a personal choice based on what works best for us at this point it time.

The only thing that shocks me is that your bank will only allow four debit transactions before they start charging. Truth is, I've never heard of that limit before. Mine has always been unlimited, and perhaps it might be worth shopping around for a getting checking elsewhere?

[rduell]

Originally Posted by safari

I found this article that explains the difference between debit and credit http://hffo.cuna.org/12433/article/1171/html

Thanks Safari!

[rduell]

Originally Posted by Jacklad

OK - that's a difference between the Canadian and US systems then. Ours are pin only, no signatures. Probably safer, because you know how often cashiers check signatures.

If you're up for a laugh, check out http://www.zug.com/pranks/credit/ to see how bad this can be in real life. Although this was a credit card, it still boggles the mind to see the transactions that were accepted, and the fact the neither cashiers nor the credit card company noticed anything amiss (well, not until the very end of Part 2, and that required a huge purchase).

Jackie

That was funny! I needed that this morning. Kind of scary though!

[BCHGRL]

I guess I'm confused by this thread. I don't see how debit cards are any more risky than cash. Someone steals your cash, it is gone. Someone uses your debt card, the money is gone. Same difference to me.

I don't know what I would do without my debit card honestly. It is quick, easy to use and I never have to worry about sending in a payment. Plus, a debit card in combination with on-line checking makes it extremely easy to track your purchases almost real time. With a credit card, you either have to record it or wait a month to get your bill. And with cash, you definitely have to record it or get a receipt. I only use checks to mail bills.

Besides being costly, I HATE WHEN I AM IN LINE AT A STORE AND SOMEONE SPENDS 5 MINUTES WRITING OUT A CHECK!!! Sorry, I just hate that with a passion. Get a debt or credit card already. I don't need to spend more 5 minutes of my life for you to write a check (in addition to the 5 I spent already while the clerk was scanning their items). I converted my mom to a debit card for just that reason. And when she realized that it could use it as an ATM card, she was that much happier. She and my dad think that going to the bank after-hours to deposit their checks is the greatest convenience ever.

[poundwise]

Originally Posted by BCHGRL

I guess I'm confused by this thread. I don't see how debit cards are any more risky than cash. Someone steals your cash, it is gone. Someone uses your debt card, the money is gone. Same difference to me.

This is very short-sighted.

Someone steals your cash, it is gone.

Someone steals your debit card, runs a few transactions that pull funds from your bank account, checks you have written bounce and electronic transactions you have established are refused. You get a note from the bank in your mailbox saying you have had items presented against NSF. You call the bank, check online, and then go down to the bank after finding out that there were debits made on your account that you didn't perform and this is causing all the problems. You fill out the paperwork to have that lost/stolen card terminated and another set of paperwork to dispute the debit card use. Depending on the bank, this is handled differently from this point, but best-case scenario, the bank puts money into your account and refunds you the NSF charges. You still have to go home and call any and every account you had that you bounced a check to or that had the EFT refused. They will almost certainly not give you back any fees they charge for late payment and/or bouncing a check, though some may do the latter. By the way, if any of these was a credit card payment, you are now subject to possible universal default by that company or any other credit card company that utilizes universal default. Do I really need to go on?

Quite a difference if you ask me.

[tinapbeana]

PW, i would have to point out that if you are someone using your debit card on a daily basis, you are more likely to notice when it has gone missing and therefore are likely to report it to the bank in a timely fashion. as a result, you have more of a lead time when it comes to preventing checks from bouncing, getting hit with NSFs, etc.

now, someone who has a debit card just in their wallet but doesn't actually use it on a frequent basis (and therefore won't notice when it's not in it's designated slot)? they could be in for a world of hurt.

granted, i no longer use debit cards, but the one benefit i can see is if i lose cash, it is G-O-N-E gone. if i lose the debit card the bank has a policy that will cover my loses.

[poundwise]

Originally Posted by tinapbeana

PW, i would have to point out that if you are someone using your debit card on a daily basis, you are more likely to notice when it has gone missing and therefore are likely to report it to the bank in a timely fashion. as a result, you have more of a lead time when it comes to preventing checks from bouncing, getting hit with NSFs, etc.

now, someone who has a debit card just in their wallet but doesn't actually use it on a frequent basis (and therefore won't notice when it's not in it's designated slot)? they could be in for a world of hurt.

granted, i no longer use debit cards, but the one benefit i can see is if i lose cash, it is G-O-N-E gone. if i lose the debit card the bank has a policy that will cover my loses.

But, if you use a credit card, you only have to dispute the charges. Nothing bounces. Nothing is lost.

Did I just say something positive about credit cards? Wow. That's surprising.

Ultimately, debit cards are probably better than carrying around a lot of cash or writing checks (as mentioned by previous poster) but they have very real pitfalls. One solution is to have a second checking account, separate from your primary, that the debit card is tied to.

Another, as alluded to, is to use a credit card in those situations where you might otherwise use a debit card. Of course, I am referring to use of a credit card as a cash-flow tool, not debt (i.e. - paying the balance).

Yet another possible 'peace-of-mind' tool is to have significant overdraft protection on your account, perhaps linked to a savings, so that you would not have to deal with bounced items; though that just exposes more money from being debited from your account(s) then as well.

Lastly, for a little extra protection, you could ask you bank for a new debit card whenever you feel like one may have been exposed or used, inadvertently, in a risky manner. Most banks will let you terminate a card and get a new one without a charge as often as once per year.

It is not as if I am saying that a person can not or should not use debit cards; but it doesn't hurt to know the potential negative side of the coin. It is not as simple as "I check my account often" or "My bank covers me"; though both of those do help to mitigate potential issues to some extent.

[tinapbeana]

Originally Posted by poundwise

Another, as alluded to, is to use a credit card in those situations where you might otherwise use a debit card. Of course, I am referring to use of a credit card as a cash-flow tool, not debt (i.e. - paying the balance).

that is a goal i have, and i'm working on it!

Originally Posted by poundwise

Yet another possible 'peace-of-mind' tool is to have significant overdraft protection on your account, perhaps linked to a savings, so that you would not have to deal with bounced items; though that just exposes more money from being debited from your account(s) then as well.

although i don't use a debit card, i do have significant overdraft protection b/c so many of my checks wind up getting processed electronically (aka you never know when a computer glitch might post something 2,3... X times 'on accident').

my primary checking is set to overdraft out of savings (with no fee) which came in handy when the bank teller put my paycheck in the wrong account! and above that i have $500 overdraft protection on both my checking accounts which i've never actually used.

[poundwise]

I should point out, most banks still have a fairly strict limit on how much you can spend on a debit card in a 24 hour period. This does offer some protection from having accounts drained, depending on if you have a significant balance and/or a linked overdraft protection account.

Also, just so no one is confused, all of my comments are referring to a VISA debit card linked to a personal checking account.

An ATM card (which is also technically a debit card though not bearing a VISA logo and requiring a PIN) is another alternative. If you ask your bank, you can get a non-VISA logo ATM/debit card and make your purchases most places just by swiping your card and entering your PIN (as opposed to signing a screen or slip.) In this case, if you lose your card or it is stolen, you are protected an extra layer because an unauthorized person attempting to use the card will not have your PIN and cannot do a signature-based transaction.

[poundwise]

Originally Posted by tinapbeana

that is a goal i have, and i'm working on it!

You and me too sister.

Actually, I do have a credit card that I use for purchases even though it is still a debt that I am paying on.

What I do is, at the first of the month, I send a large payment to the card. What this payment actually represents is my gas, grocery, and a few other budgeted items money for the month. Then, I use the card for gas and groceries, etc., over the course of the month, spending no more than the amount of that 'payment.' That saves me some significant interest over the course of the month. Later in the month, I also send in my regular payment which includes any extra I send as part of debt repayment plan.

[Broken Arrow]

Poundwise, your arguments involving the risk of using debt cards is half the reason why I've switched over to a credit card for everyday use. That way, none of my money is touched, and I just have to dispute the fraudulent charges.

Of course, there are obvious, more hazardous downsides to credit cards. For example, I believe if an individual is having a hard time with their spending, tracking it, or carry a sizeable balance on their credit card, then I believe it would be better to use a debit card for the time being. A very good friend of mine is like that. He doesn't track his spending, and... probably doesn't even care actually. Right now, he's got like 4 maxed out credit cards and was constantly getting dinged for it. Personally, I am GLAD and even surprised that he's cut up all of his credit cards and has resorted to a debit card instead.

I too have used my debt card for the above reasons. I only started using credit cards again earlier this year, now that I track every penny and carry no balance.

[tinapbeana]

Originally Posted by poundwise

You and me too sister.

Actually, I do have a credit card that I use for purchases even though it is still a debt that I am paying on.

i think that's where i'm getting hung up: part of me really doesn't want to use my CC for monthly expenses until i've managed to pay it down to a responsible level and kept it there.

[poundwise]

Originally Posted by Broken Arrow

Poundwise, your arguments involving the risk of using debt cards is half the reason why I've switched over to a credit card for everyday use. That way, none of my money is touched, and I just have to dispute the fraudulent charges.

Of course, there are obvious, more hazardous downsides to credit cards. For example, I believe if an individual is having a hard time with their spending, tracking it, or carry a sizeable balance on their credit card, then I believe it would be better to use a debit card for the time being. A very good friend of mine is like that. He doesn't track his spending, and... probably doesn't even care actually. Right now, he's got like 4 maxed out credit cards and was constantly getting dinged for it. Personally, I am GLAD and even surprised that he's cut up all of his credit cards and has resorted to a debit card instead.

I too have used my debt card for the above reasons. I only started using credit cards again earlier this year, now that I track every penny and carry no balance.

Absolutely. My Dad was much the same way. He uses a debit card now and it has changed how he spends in a very positive way. Of course, that is not the only change he made but his and your friend's example in this regard illustrates a legitimate benefit for many on the use of debit cards.

[poundwise]

Originally Posted by tinapbeana

i think that's where i'm getting hung up: part of me really doesn't want to use my CC for monthly expenses until i've managed to pay it down to a responsible level and kept it there.

I completely understand, however, consider this:

Anytime you can reduce the balance of the card account you are saving money. Since I started doing this, I have paid the same 'regular payment' (not the minimum asked for by the card company) and a substantial amount more of my payment goes to the principal instead of interest because I lower the balance a significant amount for at least half of the cycle.

Note that an important part of this is that I pay (put the money toward the card) FIRST. I also keep this 'payment' (which really isn't a bona-fide payment of debt) separate from my 'real payment' (which is my debt-repayment plan mandated amount to pay on the account each month.)

[tinapbeana]

Originally Posted by poundwise

I completely understand, however, consider this:
Anytime you can reduce the balance of the card account you are saving money. Since I started doing this, I have paid the same 'regular payment' (not the minimum asked for by the card company) and a substantial amount more of my payment goes to the principal instead of interest because I lower the balance a significant amount for at least half of the cycle.

Note that an important part of this is that I pay (put the money toward the card) FIRST. I also keep this 'payment' (which really isn't a bona-fide payment of debt) separate from my 'real payment' (which is my debt-repayment plan mandated amount to pay on the account each month.)

i was thinking along those lines and how the lower avg daily balance could work to my benefit, so i'm going to have to ponder this one for a bit.

my other concern actually has nothing to do with me, it's DH if he sees me start using the CC. he has no issue borrowing from peter to pay paul, and the 'cash only' diet our household has been on the past couple of weeks has been working fairly well. if i start using the CC for things like groceries, i envision him going 3 yr old on me (like going postal you know!) in the store...

maybe i could just use it for actual bills: cell, elec, cable... hmmm, will have to crunch some numbers...