Debit cards, Pros and cons

[tabbycat31]

that was the last time I ever used my debit card (and the one I had was newly issued since my last one expired). Now I only use it at the bank's ATM and put everything on a credit card instead. I have a $4100 limit CC and charge maybe $500 a month. A purchase that size, I could have easily disputed with the CC without affecting my checking and savings acct (I keep a small savings acct linked to checking)

[LivingAlmostLarge]

steve...on avoiding debt with a card...you don't see it as having 1k to spend, you see it as having 1k, 900 of which is for the mortgage, 100 for groceries....

Yeah some people think of it wrong, and others use it, just like with CCs, you don't see your CC as unlimited spending, and others don't see the debit as 1k free cash.

On the other hand if Joe Schmoe needs a cash only plan and we try to talk him into a debit card, he just might end up in debt trying to pay bills.

Then again Jane Shane might use debit now, try to switch to cash and find that she has more cash than she needs and no banked money for the bills. (or none for the car repair that just appeared....)

You gotta find a plan that works for you to the best of your 'bent' and then keep looking for ways to improve.

I'm really confused. I don't use debit, never have and never will. Too much time and effort.

But seriously I always thought people who used debit were asking for trouble having to constantly juggle their checkbooks. They never know if they have enough in there, and thus why there were so many overdrawn fees, bounced checks, etc.

I get using a cash only system, like real cash, but I just don't get debit cards. At that point you're just using a CC, in facta debit card can be used like a CC.

[disneysteve]

But seriously I always thought people who used debit were asking for trouble having to constantly juggle their checkbooks. They never know if they have enough in there, and thus why there were so many overdrawn fees, bounced checks, etc.

I was going to post the same thing. It seems to me that someone depending on a debit card needs to have a much higher level of financial control than someone using credit. The debit card user needs to keep their account balanced to the penny at all times and at every moment needs to know exactly how much is in the account, what payments are outstanding and what bills are due when to know how much is available for current spending. It also means, most likely, that you need to maintain a higher balance in that account. Since most checking accounts don't earn interest, or earn very little, that isn't a great idea either.

Am I missing something here?

[Coleroo]

But seriously I always thought people who used debit were asking for trouble having to constantly juggle their checkbooks. They never know if they have enough in there, and thus why there were so many overdrawn fees, bounced checks, etc.
.

We use a cash only system (works best for my husband) but I prefer doing everything electronically - and using debit.

I think you just have to be good with remembering numbers. I've always known how much (almost to the penny) I have in my bank account, and I only keep enough in there to cover whatever bill Im paying and a little spending money. If I have say, $354 in there, I know it - and I know that if a payment is coming up of 250$ then I have $104 to spare. If I have $104 to spare, and I spend 94$ on groceries, I have 10$ left. Period. It just takes a little memory. I never even used a check book balance. I just remembered what was coming through. in the 8 years since i've been using debit, I've only been OTL once - and that wasn't due to debit use.

Some people though can't handle it... like my husband. I had to leave work one time to try to beat a withdrawal fee to the bank when my hubby got his first checking account --- because he had withdrawn. I called him and was like, HONEY.. if you have only 10$ in the bank, how can you make two purchases for 6.34 each??? He said it was because he didnt know what the remaining balance was because the receipt didnt tell him. *sigh* *double sigh*.

[scfr]

Coleroo - Thank you for that explanation! Now I think I understand why the person I mentioned uses a debit card so successfully ... She has this absolutely perfect photographic memory! I had assumed she was tracking every purchase carefully (which was a bit surprising), but now I
see that she must just be tracking the balance in that annoyingly-perfect memory of hers. Wow.

Well, this confirms that for me with my far-from-perfect memory, I should continue to stay away from debit cards.

[QueenOphelia]

I use our debit card for most purchases. We rarely use cash - in fact the last cash we took out was $40 on July 5, 2006 and we still have most of that left. No transaction fee for that because it was done at the grocery checkout.

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?

I would feel odd (and the owner would sneer at me) paying for a soda and newspaper at the deli/newstand with a debit card.

I go to alot of street fairs, antique shows, funky bars, etc. where cash is the best way to get a good deal or the only way you CAN pay.

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

[disneysteve]

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?

I would feel odd (and the owner would sneer at me) paying for a soda and newspaper at the deli/newstand with a debit card.

I go to alot of street fairs, antique shows, funky bars, etc. where cash is the best way to get a good deal or the only way you CAN pay.

Good points. It is against CC rules to impose a minimum charge, so you can argue that point.

You're right about sometimes needing cash, though. We like to shop at thrift shops, yard sales and flea markets. Cash is the only accepted form of payment at most of those.

[lgslgs]

I was going to post the same thing. It seems to me that someone depending on a debit card needs to have a much higher level of financial control than someone using credit. The debit card user needs to keep their account balanced to the penny at all times and at every moment needs to know exactly how much is in the account, what payments are outstanding and what bills are due when to know how much is available for current spending. It also means, most likely, that you need to maintain a higher balance in that account. Since most checking accounts don't earn interest, or earn very little, that isn't a great idea either.

Am I missing something here?

I think you are sort of missing that using debit cards isn't really that complicated or that big of a deal.

Keeping aware of how much money is available when using a debit card isn't a whole lot different than being on the cash system and choosing to stay aware of how many $$ are in your wallet. How often do cash users get surprised at the checkout or when the restaurant and find out that they don't have enough to pay the bill? (Correct answer - responsible ones don't, and ones who are lax with their money have it happen a lot.)

Debit cards are lousy for folks who have problems with spending more money than they have, or for folks that just can't be bothered to do something no more difficult than recording their spending in a check book used to be. But credit cards are just as lousy for those same people - the only difference is that abusing a debit card gets you immediate service fees and abusing a credit card gets you debt. And overspending the cash in your wallet used to mean that you'd be arrested or at least be doing the restaurant dishes until you paid back your debt. Bad money handling brings bad results no matter whether it's through using debit, credit or cash.

It usually isn't the financial instrument that causes problems for people. It is their behaviors. I just personally feel that financial instruments that come with all sorts of added protections and provisions for lending you extra money if you mess up aren't the great deal that they are promoted to be.

In fact, now that I think about it I'd probably agree with Ima that cash is best if the nearest branch of my bank wasn't over 200 miles away. But with no bank nearby, my debit card gets treated as a big pile of cash exactly equal to my bank balance (and NOT linked to any other accounts through overdraft "protection".) Sure, I've got to pay attention to what I'm doing with it and make certain choices to decrease theft risk but that applies to cash, credit, gift cards, vouchers or whatever.

Lynda

[poundwise]

I don't understand the problem with keeping track with debit card (or credit card) use.

In my experience, whenever you use one for a purchase, they give you a slip of paper (a receipt) that you can stick in your wallet or purse. You don't have to "remember" all your transactions. Just keep the receipt(s) until you get home. If you can't manage that, I'm not sure you can be trusted with cash either.

[disneysteve]

I think you are sort of missing that using debit cards isn't really that complicated or that big of a deal.

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. They are scheduled to come out "on or about" certain dates, but the actual day can vary a couple of days one way or the other and the amount can vary from month to month. Keeping specific track of those payments to make sure I had enough in the account to cover purchases would be a royal pain. Plus, it would mean (for me) carrying my checkbook register with me to record each transaction and keep the balance up to date.

For others, though, their financial lives may not be that complex and using debit might work just fine. Not knocking it. It just wouldn't work for me.

The other problem is I'm married, so my wife and I would both be spending money independently from the same account. Neither of us would know what the other was out spending, so tracking the balance would become impossible.

[lgslgs]

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]

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]

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

Lynda

DITTO!