We all know how handy the plastic has become and are also aware of the pitfalls of their use but the thought of going without a credit card may send shivers down your spine. Have your thought about using a debit card? You’ll be surprised to find that having a debit card could actually teach you good habits.
Debit cards have many of the same advantages as their credit counterpart such as use on the internet, not having to carry wads of cash, use for identification purposes and convenience in stores. So why then would this version teach you good habits? Here are a few points to consider…
- Identification of needs and wants. First of all with a debit card you are using money that you have and you are not borrowing the funds as you are with the use of a credit card. If the money is not in your account you cannot make the purchase and must think about it more carefully. You need to ask yourself if you need the item or is it merely a ‘want’.
- Brings awareness of your spending habits. As you can only spend what is in your account you will become more conscious of what you are spending your money on.
- Helps you to create a budget. Budgeting is an all important tool when it comes to sorting your finances and being on top of things. Because you have a limit for your spending, creating a budget makes sense to get the best from those limited resources. Budgeting is no longer a ‘bad’ word.
- Start to save money. For example the daily coffee fix and buying lunch often cost more than you think. Once you use your card for their purchase you may realise what you thought was only $5 a day is actually $9 a day! Think about it: $5 over five days a week for a year is $1300 in the year but $9 is $2340 over the same period! Make your lunch and only have coffee out as an occasional treat. Think about what you could do with your savings…
Spend within your budget. Using debit cards is more like using cash. Research has shown that spending on credit cards makes us more likely to overspend by up to 18%. When the pay comes in you are more likely to use your card cautiously and live within your means. Anything that encourages us to live within our means has got to be good.
So there you have it. Ultimately, by creating good habits your humble debit card can save you from a lifetime of debt.
Author: Lyn Bell
Lyn Bell has been in the finance industry for more than 30 years and is a Certified Financial Planner. She has helped many clients achieve their financial goals.