Debit cards, Pros and cons

[lgslgs]

Originally Posted by QueenOphelia

Wow! How do you pay for things at places that don't take debit cards or only take credit cards with a minimum of $10?

<snip>

Maybe it works for certain lifestyles where you only go to chain stores and don't do alot of small, everyday purchases where the owners like cash

Yeah - guess you are right. We don't go to any places like that.

Lifestyle is a lot of it. We're really into limited trips out and consolidating things to be very focused when we shop. We're rural enough that it takes genuine intent to get to shopping areas. Because of that we view shopping as a necesary inconvenience and buy what's on the list and get it over with.

We really don't have a lifestyle that involves browsing and spending. But that was also the case for us when we lived in Baltimore, so it isn't just being out in the sticks. We're the sort that can make a date out of going to Barnes and Nobles, reading while there, not buying coffee, and then hitting the nearby library on the way home to check out or order the books that we liked.

I guess with any method, handling money is easier if you are queen tightwad and the wallet has to be pried from your pocket with a crowbar.

Lynda

[lgslgs]

Originally Posted by disneysteve

Lynda, I guess it depends on how you have your financial life set up. I am quite responsible with my money, but I think using a debit card instead of a credit card would be a huge headache. Why? I have numerous bills that are automatically deducted from my account - gas and electric, water, investment accounts, insurance premiums, etc.

Hi Steve -

Those kinds of payments are messy for us as well. I usually put them into MS Money at the start of the month (using estimated amount and date) and then tweak them as the final amounts/dates come in. So in my head I consider the money spent already on day one of the month.

One real difference in debit vs credit/cash combo for us is it seems that your family is going to have a lot more individual transactions per month than ours. The added number of things to record, and needing to rely on multiple people to turn in receipts could get messy quickly. If I was in that situation I think I'd still use debit, but I'd be a whole lot less cheerful about keeping my records current - and woe to the family member who forgets to hand me a receipt!

Lynda

[Ima saver]

Wow, I could see how being married and both having a debit card could cause a lot of problems.

[Aleta]

I just had my card put in use yesterday. You never know when you are someplace and you would need some cash. I also like the fact that I can go to the machine and withdraw money for my monthly cash expenses rather than writing a check. The card has its uses but it has to be in responsible hands. I find the ATM machine outside my bank available to use at all times rather than the busy line inside the bank or the long drive through lane. You can also make your deposts there as well.

[PrincessPerky]

Originally Posted by lgslgs

It usually isn't the financial instrument that causes problems for people. It is their behaviors.

Lynda

DITTO!

[disneysteve]

Originally Posted by lgslgs

One real difference in debit vs credit/cash combo for us is it seems that your family is going to have a lot more individual transactions per month than ours.

True. Without looking at statements (since I'm not home) I'd estimate 40-50 transactions/mo. between CC and checking account.

[lgslgs]

Originally Posted by disneysteve

True. Without looking at statements (since I'm not home) I'd estimate 40-50 transactions/mo. between CC and checking account.

Now you've got me curious. Time to pull up records.

We've got 9 bills per month that are done through automatic e-bill payment or online bill pay.

Then 3 errand days per month - those have 2 - 6 transactions, but it's easy to deal with the receipts when we get home. Anything more than 4 receipts is probably due to home business or HSA spending so we have to fuss with the receipts anyway for IRS record. So normally 12 - 16 receipts per month there.

Then there's irregular on-line purchases for stuff we can't buy locally (garden seed, holiday & b-day gifts, repair parts). Those come in fits and starts but it's no big deal to log them right when the order is places.



Before we really trimmed down our lifestyle, though it wasn't uncommon to have 40+ purchase transactions and 12+ e-bill payments per month - and those would be scattered across a lot of days. We dealt with that by putting receipts in a basket on my desk and I'd enter them every Wednesday and Saturday and hubby and I would both take note of our checking account balance. If a big pile of receipts came in between those days, or we know there would be an unusually large purchase, I might update things an extra time. And if either of us was thinking of a non-routine purchase we'd mention it to the other so that we both wouldn't end up trying to spend the same money.

We also did things like time our monthly transfer to long term investment accounts to take place a week or so after our end of month flurry of mortgage payment and bills. That way we held off slightly on transferring a large chunk of cash from paycheck to investment firm until we were sure our major variable expenses (fuel oil, electric) had been accounted for.

It may have been a bit more fuss work than we have now, but since we were aggressively building an early retirement nest egg anyway at the time it was useful to really be in close touch with our spending habits.

Lynda

[George23]

One huge con for a debit card would have to be that you are not getting a % back/earning rewards/etc. like you would if had used a rewards credit card and just paid it off in full every month. (but then if you don't watch yourself I guess it can be tempting to some to spend more than you have).

[LivingAlmostLarge]

There is ABSOLUTELY no way my DH could manage a debit card. He is so cheap he hates spending money. $20 last him forever. Who buys stuff less than $10? Not us, we don't do coffee, sodas, etc. Very, very rarely, mostly we have to be out shopping or on vacation. But during the week we spend big ZERO. I've got the CC transactions to prove it. We brown bag it daily, bring drinks to work, stay at work, don't go out for coffee, then come home. When do we spend money less than $10 a day?

Also we share one checking account so it'd be a hassle to discuss purchases like today at home depot DH picked up toilet repair stuff. I just pay CC bill and that's it. So much easier.

[disneysteve]

Originally Posted by lgslgs

Now you've got me curious. Time to pull up records.

I was curious too.

Last month, we had 17 transactions in our checking account and a total of 54 between our 2 credit cards. If we used debit instead of credit, that would have meant 71 transactions to keep track of. Doesn't sound like fun to me.

[buzz]

Originally Posted by disneysteve

Can you explain what you mean? How would that eliminate problems? Aren't debit cards from online banks subject to the same problems, theft, etc? Also, what good is an account that only has $75 in it?

As I've said, I don't use debit so I don't really care but I'm always curious to hear other opinions.

Sorry dizz, about the delay in response. The point I was making was that a dedicated debit account would be like a day to day petty cash account. Keep a low balance that won't cripple you or put the mortgage payment in jeopardy.

$75 would put gas in my tank and lunch in my belly. If more is needed, more can be transferred to the account. If you suspect the account has been compromised, it can be closed and another opened.

I don't present this as the idea that supercedes all others, but if you prefer a debit account to credit, it's workable. I do not use debit cards that are connected to accounts with large balances. I only keep those cards in case I need to access cash or transfer funds quickly for some reason.

As I said, I prefer credit cards for nearly all situations, but I frequently use a debit card when buying groceries, and take some extra cash back. I don't worry about any problems with theft.

[savingandinvesting]

If you have the discipline to pay off your credit cards monthly before they start to accrue interest, then I definitely think that they are better.
1. You keep your money in your account for longer while interest accrues
2. The benefits (points or cash backs) are typically better on credit cards
3. In case of dispute or fraud, it is easier to stop a transaction from going through
If you do not have the discipline to pay them off and they end up leading you down the wrong path, then perhaps a debit card where the pain of paying for things is more immediate might be better. Debit cards on accounts with large balances can lead to bigger fraud issues which can be more dificult to resolve than with credit cards. As an aside, retailers tend not to like credit cards like Amex because they cost the retailer more, and Amex them passes on some of these savings/benefits to the cardholder typically.

[Coleroo]

Originally Posted by disneysteve

I was curious too.

Last month, we had 17 transactions in our checking account and a total of 54 between our 2 credit cards. If we used debit instead of credit, that would have meant 71 transactions to keep track of. Doesn't sound like fun to me.

WOW! I definately see your point of why you guys choose not to use a debit card. The more "hands that are in the pot", the more complicated it would be to remember. You have to make sure you have the "cash" to cover each transaction at various points and days throughout the month. The more automatic debits one has, the more difficult that becomes.

[Aleta]

Isn't an ATM card and debit card the same thing? There are some businesses because of credit card charges work only with debit cards.

I would say that a debit card is importantant to someone trying to stay away from the credit card while pulling themselves out of debt.

Also, it is the other answer of withdrawing cash without going through the long drive-thru or inside the bank. It has more assessible hours than the bank. There has been times that my husband has needed the cash but the bank was not open when he left home.

I think like the majority here thought that the credit card is best in that it gives you rewards on everyday stuff inclucing your satellite, etc.

[Ima saver]

I like the cash back that I get on my credit card. Plus, my business checking account pays a small percentage in interest, so i earn some interest on the cash until the credit card bill comes in. My bill is easily $6-8 thousand a month because it is used to charge building materials each month.

since I am on the cash envelope system, I always have plenty of cash.

[PrincessPerky]

Just because It was brought up I checked..for the month of May..35 transactions...between two accounts, though two don't count as they were transfers of money from one to another.

More important on ease of tracking..days money was spent...about 8...Not including bills paid.

[cptacek]

Originally Posted by Ima saver

Wow, I could see how being married and both having a debit card could cause a lot of problems.

If you are married and both have a check book, it is the same thing. I consider the debit card = check book with less writing and I can get gas without going into the store.

I keep all the receipts and enter them about every 2 weeks, when I get paid. If I have a big bill coming up (the mortgage on the 1st) I enter it in my check register (I use excel) a few lines down from my exact total so I can see what I have after it is paid. I consider it already spent. I then work with the remaining balance. If I have more receipts before I paid the mortgage, I enter them in order, but I haven't had a problem overdrawing.

[kv968]

Originally Posted by disneysteve

I was curious too.

Last month, we had 17 transactions in our checking account and a total of 54 between our 2 credit cards. If we used debit instead of credit, that would have meant 71 transactions to keep track of. Doesn't sound like fun to me.

I don't understand why you think it's harder to keep track of debit card transactions rather than cc ones. To me it's easier. As soon as you make a transaction it posts online. You check it, make sure it's correct and be done with it. With a cc don't you have to wait until your bill arrives and make sure all your receipts match the bill? Maybe because I don't keep a seperate ledger of my transactions but instead use online banking as a ledger it's easier for me. All I know is I've used my debit card for years and never had any trouble with keeping track of what money is in my account. And my memory stinks

[disneysteve]

Originally Posted by cptacek

If you are married and both have a check book, it is the same thing.

Not at all. The checkbook stays in the desk drawer. If either of us writes a check, it gets entered immediately in the register so the next person to write a check knows. And generally, I'm the only one who uses the checkbook. DW might write 5 or 6 checks a year.

If we each had a debit card, however, we could be out and about spending money and the other person wouldn't know how much had been spent.

[disneysteve]

Originally Posted by kv968

I don't understand why you think it's harder to keep track of debit card transactions rather than cc ones.

My point, I guess, is that I don't need to keep track of my credit card transactions because the money isn't coming out of my account at the time of purchase so I don't need to worry about overdrawing the account. That possibility doesn't exist with credit as it does with debit.