At some point in everyone's financial life, there comes a time when survival is your main concern, which is all the more reason to be very intentional about your money now. Should you accept this budgeting challenge, your two main priorities should be to maximize your income and minimize your expenditures. While the first objective – maximizing your income – is a long-term goal that requires both strategic and tactical steps, the second – minimizing your expenditures – is a goal that is achieved in part by simple means, such as picking the right debit card.
Understand Card Terms and Conditions
To ensure the use of a debit card is a means to save money, read the card's terms and conditions. For instance, make sure you understand a card's rewards program – its qualifying criteria, reward limits and when and how the rewards are allotted.
Checking account and debit card terms and conditions vary from one financial institution to another and one debit card type to another. For instance, some debit cards offer a rewards program and others may offer a cashback program that allows you to earn a percentage of each debit card purchase.
The Discover Cashback Debit earns a debit cardholder 1 percent cash back on purchases up to $3,000 each month. If you automatically deposit that money into a savings or investment account, your debit card spending accelerates your savings program.
Consider Your Financial Budget
The primary objective of a budget is to minimize your expenses and maximize your savings. When you eliminate unnecessary spending, it's more likely you'll save and invest the cash you'll need to achieve your long-term goals and pay for unexpected expenses. Also, budgets make it more likely that you'll lower your credit card debt, pay off your loans and invest for your retirement.
A debit card supports those objectives by providing a log of your expenses that you can categorize by type, such as personal versus business expenses, and by categories, such as auto and child care expenses. The approach allows you to compare planned expenses to actual expenses to identify instances of overspending so you can eliminate them. The card also documents ATM and automated deposits to your checking account.
Financial apps are available to help you monitor your debit card spending and help develop financial discipline. The apps allow you to log on to online or mobile banking regularly to check your account balance and transaction history. Also, the apps offer spending analytics to categorize your transactions.
Use Financial Apps
If your debit card receipts indicate that you've spent less money than you budgeted for, you can manually transfer the difference to your savings account. But financial apps exist, such as that offered by Chime, that can help you build your savings in other ways.
For instance, the Chime Round Up savings program rounds up the dollar amount of a purchase that's made with your Chime debit card to the nearest dollar and transfers the difference between that amount and the purchase amount from your spending account to your savings account. Likewise, Acorn's Found Money program allows partners, such as Apple and Macy's, to give a buyer cash back in the form of a direct deposit to the buyer's savings account of a percentage of a product's purchase price.
In all cases, you should evaluate whether a rewards program is financially feasible. For instance, if you can purchase a product from multiple dealers, the rewards one dealer pays a buyer may not compensate for a higher price. Also, to get a head start, check out the current best debit card rewards program rankings determined by leading experts, such as U. S. News.
Watch Out for ATM Fees
Your debit card grants you the ability to deposit and retrieve funds via independent ATM networks, such as Allpoint or Moneypass, and the network of your own financial institution. You can save money by limiting your use of ATMs to those operated by your debit card issuer or within its network.
If you use an ATM that's not operated by your bank, you can be charged a variety of fees:
- ATM Operator Fee: If you use an ATM that is not a part of your bank's network, the ATM operator's fee may be twice or three times that charged by your bank.
- Non-Network Fee: Your bank may charge a "non-network" fee if you use an ATM that's operated by another bank or institution. You may not be alerted to this fact at the time of the transaction.
- International Fee: The fee for an international ATM transaction is equal to the ATM operator fee plus of conversion fee that's a percentage of the cash you withdraw.
To save money, use your bank's app to find its ATM locations, choose the cash-back option when making a purchase or withdraw cash less frequently, but in larger amounts.
Consider Card Fees
Your debit card's issuing institution can charge a number of fees ranging from a monthly service fee to monthly maintenance fees and from card replacement fees to an inadequate balance fee. The amount of these fees vary from $1 or less to a double-digit fee for card activation.
Also, the financial institution might charge a per-transaction fee. So, before you conduct any debit card transactions, review the financial institution disclosures about fees and plan your card usage accordingly.
Set Up Account Alerts
On receipt of your debit card, enroll in the issuer's checking account low balance alerts program to avoid overdraft fees. The system will notify you by text message or email if the cash in the account that's tied to your debit card fall below a certain dollar amount. Otherwise, you might incur an overdraft fee if you make a purchase that's greater than your account balance.
You might also set the alerts that notify you that your balance is more than a certain amount so you can transfer the excess funds from checking to savings. Also useful are the alerts that notify you of possible fraudulent account activity, the notification of a direct deposit and the account profile change alert.
Read More: How Does a Debit Card Work?
Avoid Card Usage Fees
When making a purchase, select the "credit" option, rather than entering your PIN after you slide your card across the scanner. Doing so will deduct the amount of the purchase from your bank account, but you won't be charged a debit card usage fee.
Shifting to the use of a debit card, rather than cash or checks, can save you money around the clock. But it's up to you to understand your card's terms and conditions and plan for those savings. Thoughtful choices about card usage, account alerts and other factors will support your budget efforts that, in turn, support your short- and long-term goals.
- Mint: Manage Your Money With Our Daily Budget Planner
- Discover: How to Use Your Debit Card Cash Back to the Fullest
- Forbes: The 5 Best Round-Up Apps For Saving Money
- Value Penguin: Bank ATM Fees: How Much Do Banks Charge and How Can I Avoid Them?
- Washington State: Debit Cards Frequently Asked Questions
- Consumer.gov. "Using Debit Cards." Accessed July 16, 2020.
- Federal Trade Commission. "When a Company Blocks Your Credit or Debit Card." Accessed July 16, 2020.
- Element Federal Credit Union. "Debit Card Holds and Issues Explained." Accessed July 16, 2020.
- Consumer Financial Protection Bureau. "A Closer Look: Overdraft and the Impact of Opting-In," Page 1. Accessed July 16, 2020.
- MyFICO. "What Is Amounts Owed?" Accessed July 16, 2020.
- Federal Trade Commission. "Lost or Stolen Credit, ATM, and Debit Cards." Accessed July 16, 2020.
- Most debit cards have cash-back awards and other reward programs just like credit cards do.
- To avoid unnecessary fees and penalties, make sure you're aware of the rules and regulations regarding your debit card. Some companies charge you a processing fee to pay bills over the phone.
Billie Nordmeyer is an IT consultant of 25 years standing. As a senior technical consultant for SAP America and Deloitte Touche DRT Systems, a business analyst, senior staff, and independent consultant, Billie has worked across the retail, oil and gas, pharmaceutical, aeronautics and banking industries. Billie holds a BSBA accounting, MBA finance, MA international management as well as the Business Analyst and Software Project Management certificates from the Cockrell School of Engineering at the University of Texas at Austin.