I Maxed Out All of My Credit Cards

For just about anything you want to get off your chest about credit cards.
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augiedog
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Postby augiedog » Wed Feb 05, 2014 3:44 pm

bgalakazam wrote:I don't know what people have agaist debit cards. You know how much money you have and you don't end up in debt. With CC it's easy to go 1K-5K-10K in debt in a month since you think you "have" the money, but you really don't.

Also, if you want to pay off the cards you shouldn't use them. Then online purchases and other places that don't take cash or check, you should use the debit card. I do this and the only time I had problems with too much debt is when I was using the CC exclusively. $2k limit doesn't meant you have $2k. It easy to spend $2k when you don't have it on a CC and almost impossible on a debit card.


I actually keep calculations on my total financial well-being with Excel. I know many other people don't keep their books up to date, and just let the bank tell them online. I count my CC balances as money I "don't have" even if I do actually have it in my checking. I know many people do not have this mentality either and see their balances separately, and often not in enough time, and often miscalculated.

Even if you have a $2k limit on your card, then you can make a $2,000 purchase as long as that credit is not used up. However, you should know better, and not spend that money. Just because you have the money in your account doesn't exactly mean that it is yours!

It's very easy for someone who has balances to think "I'm going to pay $50 on all of my balances, and use my debit card for everything else." So you pay your bills as a bank draft, buy some gas on debit, and have lunch on debit. What you bank does is charge $1 for the gas, and settles the full amount by the end of the week. The restaurant thinks you're leaving them an 18% tip on a take-out item, and charges the tip and settles the full amount by the end of the week. Your credit cards will pull their money out by the end of the week as well since it takes 2-3 days for them to process the payment and 2-3 days for your bank to process your checking account.

Now that the week is over, the gas station has changed their $1 charge to $56. Suddenly your bank account is in the negative, and because the gas was the most expensive charge, that is processed first. In the end you, may be paying 3 overdraft fees of $35 each and a $20 return fee from the last card payment that bounced.

If you had instead charged the gas to your credit card, and the restaurant to the credit card, you would have had 30 days for the billing cycle to end, and 25 days to make the payment on them, and possibly pay $5 in interest.

This nightmare situation happens to three of my friends all the time. One of them doesn't know her balance because she relies on online banking for her current account balance (this number is almost never up to date - transactions can be missing for days and show up a week later). She goes to Walgreens to buy cigarettes for $7, McDonald's for $10, and then she buys $30 gas on debit, and ends up paying $140 for it because she couldn't put any money in her account (they give you 3 days) since the next day was her pay day and the check doesn't clear on time either.

Credit cards are paid off in monthly cycles, and creditors will give you options to skip payments, defer interest, or pay your balance in full by the agreed time. Credit cards do not charge over limit fees either (at least from what I have). Debit transactions require immediate payment (like cash), and many times result in withholding your money temporarily and transactions that appear late (like credit).

MemberSince99 wrote:Yeah, if you can get a prime credit card, I just can't for the life of me see using a debit card I see no advantage. However as you said that assumes you don't overspend. That's the one danger and for someone who can't resist that, I'd say take your chances with the debit card, keep a minimal amount in the account it's hooked to and just live by cash and carry. Otherwise, if you can live within your means, there is no reason I can see to use debit.


Keeping a minimal amount of money in your account and using a debit card is exactly what gets you into trouble fast!
American Express: Blue Cash Everyday (10k), Everyday, ; Discover It (7.3k) ; Target (2.1k)

Citi: Diamond (2k) ; Bank of America: Cash Rewards (2.6k) ; Capital One: Quicksilver (3k) , Sony ; Chase: Freedom (3.7k), Slate (3k), (Amazon) ; Barclay Ring ; Synchrony: Walmart MC, Amazon, Ebates


MemberSince99
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Postby MemberSince99 » Wed Feb 05, 2014 4:57 pm

Not sure I understand how keeping a minimal amount of money the debit card is hooked up to and using a debit card responsibly will get you into trouble fast?


I did that for many years without an issue. Granted I got lucky no one stole or hacked it, but it taught me how to manage money (don't spend more than you have).

augiedog
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Postby augiedog » Wed Feb 05, 2014 5:25 pm

MemberSince99 wrote:Not sure I understand how keeping a minimal amount of money the debit card is hooked up to and using a debit card responsibly will get you into trouble fast?


I did that for many years without an issue. Granted I got lucky no one stole or hacked it, but it taught me how to manage money (don't spend more than you have).


Even if you do manage your debt responsibly, the fact that transactions are never up-to-date puts you at risk of going under, especially when you don't have too much in your account. You can go negative because of the manner in which transactions are recorded (i.e. temporary holds, late-posting transactions, checks clearing next day). If you purchase something as debit, and then return it, the money is withheld from your account until the merchant processes it! I don't see any benefit that debit cards have over cash other than being easy for online transactions. Banks can report your checking account as being negative; I had my friend find this out after he tried applying for a checking account with a different bank than he was currently using, and they would not accept him for "having a history of negative balances."

It certainly is true that YMMV, but I have seen too many people fall into traps by using their debit card.
American Express: Blue Cash Everyday (10k), Everyday, ; Discover It (7.3k) ; Target (2.1k)

Citi: Diamond (2k) ; Bank of America: Cash Rewards (2.6k) ; Capital One: Quicksilver (3k) , Sony ; Chase: Freedom (3.7k), Slate (3k), (Amazon) ; Barclay Ring ; Synchrony: Walmart MC, Amazon, Ebates



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