Shhhhh … don’t mention this to your banker … but, in a nutshell, no.
“Wow, Ronda, that’s harsh!” “Yikes.” “You don’t understand, it’s SO-o convenient.” “It’s on my phone.”
Say what you will but I’d be egregiously remiss as a money coach if I didn’t explain the downside risks of using the convenient debit card or smart phone wallet app.
First, contrary to popular belief, using your debit card does NOT help your credit score. After all, it’s not a credit card, a loan, or a mortgage. Therefore, it is not reported.
A debit card is how the bank makes 2-4% on every transaction. The fees alone keep your local banker very well off, with about half of all purchases in the US being made with a card.
A debit card is also a way for the bank to track every single item you purchase, where it was purchased, how much you paid, and everything else. That’s why certain industries favor cash as its’ less trackable.
While attempting to cut the business in certain industries remains one of the key excuses for a cash-less society, the down side risk to your autonomy is enormous. Butthe banks are salivating at the fees on the other half of purchases.
That’s a discussion for another day. For today, we want to focus on the benefits of a debit card; or not, as the case may be.
A debit card does not help you manage your money, honey. It sucks the $$ out of your account like a child slurping up their first milkshake: quickly and efficiently! Unlike a frozen treat, it doesn’t stop slurping when the $$ is gone. No, it takes imaginary money and then charges you a gigantic fee to use the imaginary money. So a $2 error on your part turns into a $40 event.
Then, while it keeps on sucking, the bank’s computer is programmed to remove $$ from your account in the order that creates the most OverDraft fees. Yes, I learned that the hard way:
One day I had a list of errands from depositing money to purchasing supplies. I made the deposit first and went on my way. Did that protect my account from OD fees? No, it did not.
You see, as the bank teller told me when I fussed about the OD fee – the largest purchases are withdrawn first so the account balances goes to 0 faster.
Then, all the smaller purchases are withdrawn, making sure each little one generates an OD fee.
At the very end of all this processing purchases and assigning fees, the deposit is added to the account; but if it doesn’t bring the account above 0 another fee is generated.
Genius? Only if you’re the bank benefiting from this scheme.
Wow! Yikes! Shazam! And words I cannot type for public consumption.
From that day on, I’d learned my lesson. I work too hard to give my money to a bank. Don’t you?
According to Bloomberg, American banks make over $8 billion per year in OD fees alone. For some banks, this is over 1/3 of their revenue.
Whether you’re wealthy or on the journey to become wealthy, that debit card may need to take a hike and fall off the mountain to its’ demise.
What do you think? Are you ready for a better way to manage your money?
©2023 Ronda Cobb, the Money Coach™
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