Debit Cards: Drawbacks And Incentives With Using Them

There are many people who are using debit cards more often as they try to lower their credit card debt. Budget control is forcing people to use money they have verses using lines of credit for spending. This type of spending can keep a person more aware of money being spent, but there is very little room for mistakes. Overspending can keep funds away from making scheduled payments which will create overdraft fees. When using debit cards, a budget will need constant observation to maintain the balance between income and spending.

There are some drawbacks to using debit cards.

*If you make an open ended charge on your debit card, there could be a hold for a fixed amount. An example of this is paying for gas. You swipe your card for approval, but the company does not know how much gas you will be buying so it puts a hold on an amount to cover. Usually, the hold will be around $80 -$100, enough to fill a large tank. Once the transaction is completed it may still take a few business days for the hold to come off. These transaction practices are set to protect the payment for the fuel company.

*Every time you use the debit card, the money is immediately deducted from your bank account. If you have bills scheduled to be paid that day and the debit withdrawal uses these promised funds, you put yourself at risk for bank fees if you overdraw as well as fees from your creditors if there is not enough money in your bank to make the payment.

*You will need be careful with your debit card information. You never want to have your Personal Identification Number (PIN) written on your card. In fact, you should memorize your PIN.

*Do not give your debit card information to anyone over the phone asking for it unless you know the party calling. There have been scams of people calling representing themselves as your bank, asking for debit card information for a false reason. Only give out the information to someone you contacted or are familiar with.

*Any fraudulent use of your debit card effects your bank account. Whether used for purchases or money withdrawn, fraudulent usage effects your bank account immediately.

*There is not the same protections for debit cards as with credit cards. Familiarize yourself with the expectations of the bank when you suspect fraudulent usage. The faster you are at reporting the better protected you will be.

Potential benefits with using debit cards:

*You will not be paying interest on your purchases made using debit cards. Debit cards use money in your bank, there is no third party funding.

*You can keep track of your balance online. You have access to check your account's balance as long as you have access to the Internet.

*You can keep monthly payments off your budget why purchases are paid in full at the time of sale.

*Banks offer alerts by email or text when you fall below a certain amount with your account. If you have a phone that is compatible with these alerts, you can be forewarned when it is time to stop spending before you offset the balance in your account.

*You can help yourself to be more aware of your purchases when you know that it is coming out of your account. Self regulated spending is key when maintaining a balanced budget.

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