Every human being needs to live at the level of his earnings. Never try to keep up with the neighbors or be enamored by the fancy things you see in the stores or on TV. Never take a vacation unless you have saved for it and earned it!
In 1995, only 2% of Americans used debit cards for purchases or other transactions, whereas a 2003 study determined that the percentage of debit card users have sky rocketed to 31%!
Credit or Debit?
Credit card companies give you a month to send them the total amount you have spent using their cards. For some credit cards, if you are in good standing and you dispute a charge, they are legally bound to remove it from your bill up to 60 days after you made the purchase.
Debit cards do not have the same safeguards such as credit cards for unauthorized transactions. If the minimum limit for a day is placed high temporarily while you travel, anyone can get hold of your debit card and empty your account. And since you are on vacation, you may never know about it until it’s too late. If you don’t have the money to cover a purchase made overseas, banks immediately punish you with penalties, sometimes many times the amount you inadvertently withdraw from your bank.
Money down the drain
Overdraft charges of more than $17.5 BILLION are paid by consumers each year according to the Center for Responsible Lending. Banks reap rewards in taxes and fees every time a customer uses the debit card for an amount that is higher than their minimum balance.
There are advantages to both forms of payment. If you are a responsible borrower who pays off the credit cards every month and keeps track of your bank balances via online monitoring, then either card will be okay for you. However, if you are the kind of person who just cannot handle money the right way, then you will in for a shock either way.
Is Debit really that bad?
Credit card companies charge horrendous amounts every month as finance charges. An item bought by a credit card today for $10 may be giving the credit card company more than double its worth over the years. So you have to work enough to earn $20, but had to give $10 to the credit card company because it allowed you to borrow the $10 a long time ago. Basically, what you earn will slowly go to the credit card company unless you pay off the credit card quickly and learn to STOP paying finance charges.
Buy only what you can afford!
That is where the debit cards come in. Debit cards may be used as a wise choice which is supposed to keep you from spending more than you earn. However, banks, in their eagerness to make even more money will allow you to overspend (so sweet of them!) and also charge you an arm and a leg before you wake up the next day! So beware of making purchases using Debit cards if you have no clue as to how much your bank balance is.
Your autograph or your PIN
There are two types of debit cards. One behaves just like a credit card and requires the use of your signature. The money is drawn in a few days from your bank. The other type of debit card used a PIN-based system which is similar to taking money out of your ATM. It is withdrawn immediately from the bank account. This is more preferable to retailers since they will know immediately if you have the money for it in your account or not.
Signature-based debit cards (also called deferred debit) are becoming less popular and most retailers prefer the PIN-based or direct debit cards. Another type of debit card is the payroll card where employers deposit the payroll into an account from which employees immediately may use it for their expenses. Again, the user usually has a fee per use as well as taxes and fees if they go over the limits.
Debit Card Pitfalls
Most debit cards have a daily limit of $250 or higher. So if airline tickets cost more than the daily debit limit, they may not be accepted by online consolidators unless the consumer can call their bank and ask them to increase the limit temporarily. If the deal falls through for any reason, paying by credit card may be a better option because you may be able to get your money back as a result of federal protection laws. Using this loophole, we can request a “chargeback” from credit card companies. Present them with the date, the amount and the merchant name and according to law they will have to take back the charges from your statement. You may have up to 60 days to request a chargeback in the case of credit card fraud. Most debit cards, however, may not come with these safeguards and you are left on your own in case of fraud.
Rental companies sometimes accept debit cards, but put an authorization hold on a certain amount of money as a backup. This money is held by the bank and will be deducted from your balance. When the authorization hold is lifted by the rental car company after you have paid the bill, the bank may still take a few days to return the held money to your account.
Foreign Exchange Transaction Fees
Credit cards charge a fee for allowing us to use the cards in foreign countries. These charges are published and more or less constant. Debit cards and ATM fees vary by company and location from very little to very large amounts. These fees add up because of the convenience of these ATM machines and also the commissions took when converting them to foreign currencies.
Beware of nimble fingers
When traveling, it is better to use your credit cards for the same reason. Europe, as well as most other countries, have pickpocket gangs that work with amazing synchronization. A couple of thugs distract people while the rest get away with your luggage.
Always keep your wallet and important papers in a coat pocket that is hidden inside your jacket or coat. Make sure that you use your credit cards only in larger stores and also store your receipts safely so that you will remember where you spent the money. As soon as you return home (or while you are still on vacation) check the credit card statements online and the unbilled statements to keep an eye out for fraud.
Although debit cards are a good idea when used properly, it is much better to learn to use credit cards the right way. Currently, they offer more safeguards and support when we run into problems. If you do not have a credit card, you can use a debit card for travel purchases so long as they are accepted and you have a good idea of the balance in your accounts.
Always prepare before you go abroad so that you can enjoy your well earned vacation!