As more people are pushed out of credit card market because of credit card companies’ stringent rules and procedures or more people voluntarily seek to use the money they have not their credit, relatively more people have come to use their debit cards. Nonetheless, debit cards are not without their pitfalls.
KNOW YOUR BANK ACCOUNT
It is important to know how much money is left into your checking account tied to your debit card before using your debit card. It is particularly important if you have automatic payments and do not have a large reserve relative to your expenses and bills built into your checking account.
As we all know, if we use debit cards more than the amount we have in our checking account, we incur overdraft charges. Although starting from August 15, 2010, credit card companies are required to ask for our permission to opt into their overdraft programs, there are less expensive ways than overdraft protection. In fact, we can link our savings account to our checking account.
KNOW YOUR DEBIT CARD DOES NOT BUILD YOUR CREDIT SCORE
This is also important to ascertain use of your debit card cannot establish or improve your credit score. Accordingly, you might want to think seriously for secured credit cards. For secured credit cards, you usually are required to put up some money as collateral, the amount should not be relatively substantial. In exchange, you receive the credit card.
CAVEATS FOR SECURED CREDIT CARD USERS
However, there are some caveats for secured credit card users.
Ensure your secured credit card company reports to three credit bureaus. And,
Ensure, to the extent possible, your secured credit card earns interest to make up for the earned interest you lost when you took out the money out of your savings account.