Wednesday, May 5, 2010

Using Debit Cards For Effective Money Management

The convenience of debit cards

A debit card is a plastic card that serves as a cash substitute when making purchases. Also known as bank cards, cheque cards or electronic cheque, they serve as an effective budgeting or money management tool. Unlike the credit card, if a purchase is made, the funds are directly withdrawn from the funds of the debit card or from your bank account. Thus, limiting your purchase to the amount of money you have in the bank. The bearer does not have the obligation to pay for the transaction at a later date. Debit cards are not for credits nor loans.

Debit cards are easy to use and carry. The fees are small and when you can easily cancel if the card is lost or stolen. While cash when lost or stolen is irreplaceable. Debit cards have proved to be aligned with personal money management and they gradually replace the cheque as well especially for big transactions. Some are designed for internet or telephone exclusive use only. In this case, no physical card is needed.

When you use a debit card, the transaction debits (withdraws) the amount of the transaction from your checking account, usually on the same day. Debit cards may act like ATM cards or cheque guarantee cards that allow for instant withdrawal of cash. Like credit cards, they can be swiped at stores or shops or through a pay phone to make a call.

Widespread use of debit cards

After the wild recession in 2009, money management and budgeting become higher in priority than usual. Many countries have used debit cards more instead of credit cards for they are regarded as a money management tool. They are applicable for consumers who are finding ways to have more control over their money. The new era had sprung with people resolving to improve their finances. People now are more afraid of going into debt. Young professionals are financially conscious on their spending and find the no-debt policy of debit cards more appealing.

When to use debit cards

With the widespread use of debit cards come enticing reward programs to encourage more people to use them.

On the other hand, because of its being linked directly to a bank account, debit cards can be more vulnerable to hack and fraud than credit cards. For a more sound money management, you may avoid using debit cards when purchasing online; buying big items in which you are not protected with dispute and item insurance when something goes wrong with the purchase; in restaurants where the card can be brought out of your sight; in recurring payments that might give you over charges or with future travel or items to be delivered in the future. Of course, you do not want to pay beforehand with items from which you have not benefited yet.

Nevertheless, the banks and other institutions are incessantly looking for more ways to protect debit card holders who are more conscious of their money management schemes, from falling into disadvantageous situations.

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