Debit cards, Pros and cons

[cptacek]

I think that most people know about how much it takes for their family to live for the month.

It sounds like you know how much that is, and when the bill for the month comes (your credit card bill) you pay that from some other source other than your checking account (or transfer into the checking account just for that purpose.) Other than that, you must not keep much in there.

Other people keep more of a cushion in the checking account. If only one person is drawing on it, that person can easily keep track of their receipts (by memory, entering it in the ledger, using tally-sticks, etc.) up to the minute. If two people are drawing on it, then both of them will have to keep receipts and then maybe it won't be up to the minute, but if you are pretty close to the edge, it can be every day. I mean, you live with that person, right? Can't you ask them what they spent the money on? This applies equally to debit cards and checkbooks that both people have access to.

I think for someone newly married, who is just learning to share the pool of money, there should be a bigger cushion. But, most people are creatures of habit. Most of their spending habits are similar from month to month. If you usually have around $100 left over in the checking account at the end of a typical month after all the bills are paid and you have bought your typical comfort items, and you want to buy something for more than that, then, you probably shouldn't buy it right then and you should discuss it with the person you share the account with. As you get more and more comfortable with sharing that money, you can tighten the pool.

of course, I'm not married, and I don't share an account with anyone. So, maybe I'm full of it.

I assume that when you get the credit card bill, you can always cover it? Pay it off every month? If so, then if you wanted to use a debit card, then you could, because you aren't living beyond your means. You would just have to keep more in the checking account. But, if you like your credit card, that is fine too.

[safari]

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. 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

The point is that with a credit card I don't have to track every single transaction and don't have to worry that I have enough money in my checking account. I can keep $500 in my checking account, while I charge $3,000 to my creadit card. When I get my credit card bill once a month, I review all transactions and then transfer just enough money from savings to checking to pay the credit card bill in full. One month I can charge $1,000 to my credit card and $5,000 the next month, so if I were using a debit card, I would also have to keep a large balance in my checking account just in case I might need that money.

[disneysteve]

Originally Posted by safari

The point is that with a credit card I don't have to track every single transaction and don't have to worry that I have enough money in my checking account.

Exactly what I was going to say. With a CC, the money isn't being taken out of my account right away so my spending isn't limited by how much is in the account. I don't need to track my transactions. I spend (and DW spends) whatever needs to be spent and we settle up when the bill comes.

[Cassandra]

I have a feeling this discussion is going to become round-about but...

I wanted to say that I see your point Disneysteve. I had never thought that with two or more people using a debit card linked to the same account you could create some serious problems. Mostly becacuse I've always been the only one using my account and when people commented that it was hard to keep the checkbook up-to-date I never thought there might be more than one person accessing the account.

Part of what scares me when it comes to credit cards is something you also pointed out DisneySteve-that your spending isn't limited to what you have. With my ATM card I have to complete a lot of steps before that money is withdrawn-giving me plenty of time to think over what the money would be used for and if I can really afford it. With a credit card I could be out of the store and in my car before it dawns on me that I probably shouldn't have bought the item.

However, someday I'll be able to control my impulse buying and when I do I'll definetly consider getting a credit card.

I guess what I gleamed from this discussion is that debit cards appear to work really well if only one person has access to the account but if more do than credit cards might be the better option.

Cassandra

[krayziebone33]

Originally Posted by JanH

I'm just the opposite. I do better if the money leaves the account immediately. I keep all receipts and enter them daily into my budget sheets. I file receipts into an envelope for that month. I have a buffer and also know how much I can spend because of the budgeted amounts. I got into a lot more trouble using credit cards. But that's just me. I guess for me, it's like spending cash without having to get it from the bank all the time.

This just about sums up my system of doing things with my debit card. I find that it works for me. I will be using my credit card a lot more often, however, because they are beginning to roll out some good rewards. We'll see what happens with that.

[SnoopyCool]

We use debit but are considering switching to our cc as soon as we are out of debt. Our CU gives us rewards for using the debit card if we use it as a credit card at the checkout.

Does anyone use their PayPal account/debit card? They also give you a % back if you use it like a cc. And if you don't link the debit card directly to your bank account, you just transfer the money and when the money is gone its gone (good for those of us that need help staying in control, and good in case someone steals your card or your PP account info).

[kv968]

I understand everyone's reasoning on which type of card they use and it all makes sense to me. I think, like it's been said before, that it comes down to the individuals behavior and dicipline. I know I started using my debit card in order to get out of cc debt. I wasn't as diciplined in paying off the bill in full and would instead run a balance. With the debit card, the "temptation" or ablity to run a balance was gone. I know many times in the past, the bill would come and "something" would come up where I would think, "Well let me just pay the minimum due this time and I'll get the rest next month". Then next month that "something" would pop up again

I'm more savvy in my bill paying these days so if I were to get a rewards card I would probably use it more than I would have in the past for everyday purchases. Paying the total amount due in full of course

[LivingAlmostLarge]

Cassandra if you get a secured CC you can only spend money you have.

[PrincessPerky]

Originally Posted by disneysteve

Exactly what I was going to say. With a CC, the money isn't being taken out of my account right away so my spending isn't limited by how much is in the account.

That line is EXACTLY why people with short discretionary spending like em..we ARE limited, and we NEED to be limited, we don't have the option of investing less to cover a 'something'.

I am not posting to get you to switch (or anyone else) just to try and help you understand why some of us choose to use the debit not credit.

Sure in a perfect world I might go for the CC and spend just the discretionary availible on the CC, but I am far from perfect

[disneysteve]

Originally Posted by Cassandra

Part of what scares me when it comes to credit cards is something you also pointed out DisneySteve-that your spending isn't limited to what you have.

That did come out kind of wrong. What I meant, basically, was that when a bill or purchase presents itself, I don't need to worry about what is in the account at that moment. I know I have the money to cover it. Its just a matter of where the money might be at the time. It could be in checking. It could be in our money market. It could be in another account. Using credit gives me the time to move the funds to where I need them before I have to pay the bill.

Originally Posted by kv968

I think, like it's been said before, that it comes down to the individuals behavior and dicipline.

Absolutely. Credit works best for some. Debit works best for others. I appreciate everyone's input as to which works best for them and why.

[Cassandra]

Originally Posted by LivingAlmostLarge

Cassandra if you get a secured CC you can only spend money you have.

I've never heard of a secure credit card. What is it?

That did come out kind of wrong. What I meant, basically, was that when a bill or purchase presents itself, I don't need to worry about what is in the account at that moment. I know I have the money to cover it. Its just a matter of where the money might be at the time. It could be in checking. It could be in our money market. It could be in another account. Using credit gives me the time to move the funds to where I need them before I have to pay the bill.

Ahh, I see what you meant now. Thanks for clarifying.

Cassandra

[LivingAlmostLarge]

You get it when you don't have Credit. DH's first CC in US was secured, you put up $1k and you spend it as needed. It's usually used by foreigner to build credit.

But I guess if you wanted to make sure you spend X amount, but have a CC protection, and not worry about balancing your checkbook, a secured CC isn't bad.

[poundwise]

Originally Posted by Cassandra

I've never heard of a secure credit card. What is it?

Though I don't recommend Bank of America specifically, here is an example of a secured credit card.

Basically, it is a card that has a limit equivalent to a balance on a deposit account with the card issuer.

Some offer a limit that is greater than your deposit and some offer options like being able to put money into a CD with the issuing bank, etc. Many are from companies you've never heard of and come with unbelievable terms and fees.

Still, some arrangements aren't bad at all and allow people to obtain a card even with poor credit or for other reasons.

[Aleta]

Debit cards are good for some people because of their situation and their tolerance and the credit card is very useful and a good tool to use for your finances.

My husband and I are going to try to use the same debit card to see how that works. We both leave our checkbooks at home anyway, so let's see how this goes.

[click4credit]

Pros - the new Visa and Mastercard Visa cards have similar acceptance to credit cards in stores and online. Can't get yourself in debt, money direct from your bank, easier to keep an eye on your financial position.
Cons - Money can't be held on a debit card without removing it from your account. For example, if you hire a car they may want to take in imprint of your card and hold say $500 on your card. This money never really leaves your account on a credit card but is just frozen from your account limit. With a debit card they would need to take the money from your account. Also you miss out on the interest free days that a credit card provides.

Probably having both a debit and credit card is a good option for most people.

[stella]

Hi

Debit cards are similar to credit cards, except debit cards pull money out of your checking or brokerage account. Debit cards do not create or increase a loan like credit cards do.

In my view debit cards are best to use as it keeps you restricted under your budget giving you enuff time and alerts not to go beyond your a/c limits , coz if you do you r bound to search for a credit card loan consolidation.

Regards
Stella
The Loan Bazaar

[skibo]

My wife and I use our debit cards for everything. They each draw on the same account, which has a $10,000 line of credit attached to it, so in cases where the balance goes below 0, it basically acts as a credit card.

So, for those who like the debit card because it limits them, this isn't the right approach. for for the poster above who like credit because it gave him more flexibilty, this approach is pretty much the same thing.

[Exile]

Here is a warning about debit cards. If you don't use yours frequently (say once a week or less), check your balance and card status every few days via ATM. My debit card was compromised w/out my knowledge (the plastic itself was not lost or stolen, but somehow the account information hacked and misused). I wasn't aware of this until I went to use my card 10 days after the attempted fraudulent charges were made. So far it's taken over 2 months to get a new card. So beware.

[Aleta]

Most of us like the credit cards that we pay off monthly because they earn rewards, offer protection, and are good insurance against a purchase that we aren't happy with. Again, some people can't handle credit cards because of their debt at the time, but hopefully down the road can put them to use in a more positive way. It also eliminates carrying alot of cash around and you are using their money for a month.

[QueenOphelia]

Originally Posted by 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).

Au contrair George. Citibank's debit card has a reward program that is:

1 point =$2 spent with PIN transaction
1 point=$1 spent with a signature transaction.

They also have all sorts of extra points for having CDs, savings accounts, investment, etc all linked together. It is actually quite the robust program.