Credit Debit Card Logos

Posted onDecember 06, 2011 - 6:39 am by Admin | 0 Comments

A $5 latte could end up costing you $35 if you don’t watch your debit card expenses carefully. Basically, a debit card works like a check. Except every time you use it, you’re immediately taking money out of your account. That’s why when you overdraw, it’s like bouncing a check, only worse. Because unlike checks, you probably don’t keep a record of every debit card purchase. And banks charge penalties of up to $30 for each item! You might make a bunch of small purchases before you realize you’ve spent more than you have. Then that $30-fee doubles, triples or even quadruples in a matter of hours!

So before you put that soda or coffee purchase on a debit card, make sure you have enough money in your account to cover it. Or you can talk to your bank about ways to avoid overdraft fees:

  • Attach your checking account to a savings account. If you are a good customer with the bank, they will often allow you to link your checking account with your savings or money market account. That way, if you go over, the money from your savings will cover it. Some banks will charge you $5 every time you overdraw. So you still need to watch your spending, but at least this way, you won’t rack up fees without knowing it.
  • Ask for an overdraft line of credit. A line of credit is like any loan. You have to apply for it. But the interest rate will be a lot lower than the overdraft fees and it acts like a safety cushion. You don’t have to use it, but the credit is there if you need it.
  • Track your spending carefully. Write down everything, even that 50 cent pack of gum or two dollar soda. And don’t forget the automatic withdrawals from your account. Those are usually recurring expenses that are easy to keep track of.
  • If you rarely overdraw, talk to your bank about waiving the fees. It wouldn’t hurt to try. They want to keep good customers happy.
  • Consider a no-fee credit card instead of a debit card. As long as you pay your entire balance every month, this may be the way to go. If you’re worried about overspending, keep your credit limit low and track your purchases. Look for a card that pays you at least one percent cash back.

Finally, it’s not used as much anymore, but cash is still king!

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Learn ways to avoid credit card debt.

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