Category Archive: Debit Cards

Reduce Credit Card Use

According to this recent L.A. Times report

Consumer borrowing increased at an annual rate of 10% in November,the largest jump in a decade… 

Outstanding credit card debt increased 8.5% in November… (emphasis, mine)

It appears that folks are using credit cards more than ever – and outstanding balances are increasing.

For more than seven years, here’s how I have reduced (and almost eliminated) my use of a credit card:

I live on a budget.

If we eliminate unplanned-for spending, we can eliminate unplanned-for borrowing.  At the beginning of the month, I know how much money I am going to spend and I know where I am going to spend it.  Some portion of credit card use results from poor planning.  Eliminate the poor planning, and we eliminate this type of credit card use.  I use a zero-based budget to manage our household finances and an irregular income budget to manage business finances.

I use online banking to pay monthly bills.

Instead of charging my bills to a credit card, I simply pay (the majority of) my bills from my online bank account.

I pay cash for everyday purchases.

I have mentioned it before, but it bears repeating.  I use the envelope system to manage my cash.  It works and is simple to use.  Again, if the goal is to reduce credit card use, the envelope system is a great tool.

I use a credit card only for reservations, not for payment.

I have used a credit card, on many occasions, to reserve a hotel room.  At the end of my stay, I pay with either cash or debit card.

I still write paper checks.

Yes, I know that I am a Luddite, but I will occasionally write a real, old fashioned, paper check.  I will do this when I give offering at church or when I need proof-of-payment for daycare or some other service.

I use a debit card when necessary.

There are some purchases (think online shopping) that really do call for either a debit or credit card.  Rather than worry about identity theft, and the loss of all of the money in my checking account, I have a dedicated secondary checking account, attached to my debit card, and I use that account for all online purchases.  When I create my budget, I allocate necessary funds to the secondary checking account and use the debit card for online purchases.  It’s not much of a hassle, and it eliminates the unnecessary temptation to use my credit card.

If I had to use a credit card -

I would only use a credit card to pay for budgeted items.

I would pay a credit card off – each month – in full.

I would refuse to use the card, simply to get a discount, points, or a reward.

I would consider the potential long-term impact of my short-term decisions.

When I combine the use of online bill pay, a debit card for online purchases, and cash for everyday purchases, there’s not a whole lot of room left for the use of a credit card.  Instead, things are simple to manage and I don’t have to add to any increase in those statistics.

Credit cards aren’t evil.  They’re neither good nor bad.  They do, however, provide an ease-of-use that can quickly wreck a budget.  I stick to my system, keep things simple, and rock on.

One side note:  I am glad to see that certain credit cards are beginning to offer longer-term zero-percent interest deals.  We used one of these deals when paying off our debt, and it significantly reduced our overall interest charges.

One final note: I do have a couple of credit cards, but I rarely use them.  Once every few months, I’ll charge a tank of gas or buy some groceries, and then pay the thing off.  I do this simply to have some limited activity on the cards.  I have monitored my credit score for several years and everything looks just fine.  There was a time when I was staunchly anti-use-of-credit card (and, I still think the world would be just fine without them), but now I’m more anti-over-use-of-credit card.  I’ve mellowed a bit in my old age.  The key is to be informed and responsible.  Rock on!

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Break The Credit Card Cycle

It has been several years since my wife and I regularly used credit cards for monthly purchases.  Instead, we use cash, debit cards, and online bill pay.  Here’s how we broke our credit card cycle –

1.  We put our credit cards in our wallets – and just left them there.  We didn’t cut them up.  We didn’t cancel them.  We didn’t put them in the freezer.  We simply made a decision not to use them on a regular basis.  Over the past six years, this has served us well.

2.  Before we started living on a budget and getting out of debt, our credit card served as our emergency fund.  If we were a few hundred dollars short at the end of the month (due to real needs and / or just wants), we would use our credit card.  The first thing we did, when getting out of debt, was establish a real emergency fund.  Obviously, no fund is big enough to cover every-single-emergency-imaginable, but we had to start somewhere.  Our goal, in those early years, was to keep between $1000 and $2000 in our emergency fund, at all times.

3.  We live on a budget and created a structure for managing our daily and monthly spending.  Click link to see yesterday’s article on this subject.

4.  We use the envelope system – which really helps to keep cash spending down, keep things organized, and promote smart shopping.  There was a time when, if I had cash in my pocket, I would spend it.  If I had $5, I would spend $5.  If I had $100, I would spend $100.  However, once I made the promise to myself that I was “done” with credit cards – I had to get serious about proper cash management.  Without the safety net of the credit card (and with no desire to constantly dip into our emergency fund) we quickly learned to be smarter with our cash.

5.  We routinely use our debit card “like” a credit card.  I use it online and I’ve even used my debit card to reserve a rental car.  A bit concerned about using our debit card for online purchases, I opened an Electric Orange℠ checking account from ING DIRECT.  (Right now, ING is offering a $50 bonus if you sign up for their Electric Orange checking.)  We keep a limited amount of money in the account, separate from our primary checking account, and use the Electric Orange account for all online purchases.  This works well for us – but we do have to be careful.  It’s easy to overspend when simply swiping a card or punching in those 16 digits, credit or debit.

6.  We ignore bonuses, rewards, and discounts associated with credit card use.  I’ll admit it:  It can be difficult ignoring all of the “extras” associated with credit card use.  However, for us, we would rather focus on zerothat’s the amount we owe credit card companies – than on the 5% discount or 2% cash back we might receive.  Sure, the “extras” would be nice, but we’re doing just fine.

That’s how we broke our credit card habit.  If we chose to do so, we could start using our credit cards again.  We do a much better job of managing our finances than we used to do.  I’m sure we could use them without a hitch, but we’re going to keep doing what’s been working.  Our system works just fine for us.  However, if we were to use credit cards again, we would simply use them and pay them off at the end of the month.  The focus of this article is not on abandoning credit card use, forever, but on how we broke the cycle of over-using them, and having to pay interest and fees.

 

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Can I Rent A Car Without A Credit Card?

This information is provided in summary form and you should conduct your own research before using any of the companies listed.  Information is subject to change at anytime.  (Emphasis added)

From the Hertz FAQs site:

Debit Card Policy-

Q: Can I use my Debit Card or Bank Card to reserve a Hertz car?

A: At most Hertz locations, debit cards (sometimes called check cards) issued under a VISA or Mastercard logo which draw funds directly from the cardholder’s account may be used to qualify for rental. However, prepaid or stored value cards which have a VISA or Mastercard logo are not accepted to qualify for rental. Debit cards must have available funds for the estimated amount of the rental charges plus a reasonable amount to cover any incidental charges in order to secure the rental. Both debit cards and prepaid or stored value cards issued under a VISA or Mastercard logo may be used as a form of payment when you return the vehicle. Please contact your local Hertz Reservations Office if you have a question about whether Hertz will accept a certain card.

Cash Policy-

Q: What can I do if I do not have a credit or debit card in my name?

A: Cash Rentals are accepted with a Cash Deposit ID Card. Applications for a Cash Deposit ID Card are available from your local Hertz Office. Applicant must be 18 years or older and the application process takes approximately 30 days. There is a $15USD nonrefundable processing fee. A Hertz Cash deposit ID Card may be used at a Hertz Location.

From the Enterprise Website-

Debit Card Policy-

Debit Card:

Some locations will accept a debit card for a rental deposit and/or payments. To be valid, a debit card must have a Visa or Mastercard logo.

Airport locations that are able to accept debit cards will require return trip itineraries.

Most local renters who would like to use a debit card for their deposit may need to complete a cash qualification process. The branch may ask for you to bring in two valid, current utility bills and your most recent paycheck stub.

It is common that a rental branch will require your drivers licence to be issued in the state you are renting.

We are happy to help you with policy information specific to the renting branch. Please contact us ahead of time to determine what is needed when renting with a debit card.

Cash Policy-

Cash:

For security reasons, our locations do not accept cash. We apologize for any inconvenience.

From the Avis FAQs-

Debit Card / Cash Policies-

Debit Card Policies

Avis reserves the right, in its sole discretion, to seek a Debit Card authorization hold in excess of the estimated rental charges. When using a debit card at Avis, there may be a minimum hold of $500 and a maximum hold of the estimated rental charges will be placed on your account.

Upon returning the vehicle, Avis will process a release of the unused portion of the hold subject to your bank’s procedures. The hold may take up to 2 weeks to be released by your bank.

If you fail to return the vehicle as agreed, Avis will obtain additional authorizations from your account to cover the rental charges.

Avis is not responsible for any returned checks or over-drafts based on this policy.

This policy applies to both U.S. residents and foreign renters.

Positive identification in addition to your driver’s license may be required.

In the United States, debit, cash or check cards can be used at the end of the rental for payment of rental charges. For acceptable credit identification and payment methods in countries outside of the U.S., please search for the specific location.

From the Budget Website-

Debit Card Policy-

Credit and Debit Card Rules

Generally, at the time of a U.S. rental, we’ll require a credit card hold of total estimated charges plus 25% or $200, whichever is greater. If you’re using a debit card at a location that accepts them, we’ll require a hold of total estimated charges plus 25% or $300, whichever is greater. However, for insurance/service replacement rentals and tour rentals, the minimum debit card authorization hold is $100. At select locations in the Northeast and North Central regions, the minimum authorization hold is $500. Renters under 25 years of age may not use a debit card. Look at the terms and conditions on your reservation confirmations for the deposit required at your specific rental location. Some select locations do not accept debit cards at time of rental to release the vehicle, but do accept debit cards for payment at time of car return.

Cash Policy-

Can I pay with cash?

Yes. Your deposit type, amount and method of payment will vary by Budget location.

From the National Website-

Debit Card Policy-

Debit Cards

When renting in the U.S., debit and check cards may only be used in conjunction with proof of a round trip travel ticket (airline, cruise ship or train) at time of rental.

A debit/check card is considered to be any non-credit card bearing the VISA, MasterCard or Discover Card logo.

Any other non-credit card without the VISA, MasterCard or Discover Card logo is not accepted.

For pick-ups in the United States, without proof of roundtrip ticket, debit or check cards are only accepted when returning the vehicle.

A credit card in the name of the renter must be presented at the time of pick-up.

Cash Policy-

Cash Rentals

Customers must meet National’s requirements for renting a vehicle without a credit card.

Only Economy through full-size vehicles can be rented with cash.

No Additional Drivers are allowed on Cash Rentals.

All cash rentals, including prepayments, vouchers, and the like will require a deposit of $300 per rental, in addition to the pre-calculated rental charges.

When the rental vehicle is returned in accordance with the rental terms and conditions, the cash deposit will be refunded upon return of the vehicle, and in some instances, the refund will be mailed to the customer following the return of the rental vehicle.

Summary:

Almost every major rental car agency WILL rent a car without a credit card.  Most, however, will place a “hold” on your debit card for the full rental price, plus, in most cases, an added deposit.

When it comes to payment, most will accept a debit card as payment when you return the automobile.  Available options appear to be:

A) Reserve the car with a company that allows you to use a debit card.  If you do this, be sure that you bank account has a sufficient amount to cover the deposit, the hold, and any other charges that you might incur.

B) RESERVE the car using your credit card and PAY for the car rental using cash or your debit card.

While I do not use a credit card to make purchases, I do carry one in my wallet.  If necessary, for the security of my family, I would use the credit card to reserve a car and then pay cash for the rental when I returned the car.

Before renting an automobile, understand a company’s policies.  Do your own research and call ahead if you have questions.  While I was compiling this information, I did not take into account ANY insurance-related policies.

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Visa Debit Cards More Popular Than Visa Credit Cards

Are people falling in love with their debit cards?

During the quarter ending December 31, 2008, people made $203 billion in purchases using their Visa credit cards.  During that same period, people made $206 billion in purchases using their Visa debit cards.  (You can read more by viewing Visa’s latest SEC Filing.  These figures are for U.S. purchases only.)

Also, during the year 2008, the number of credit cards in use rose 2%, from 706 million to 813 million, as compared to the year 2007.  Over that same time, the number of credit cards in use rose 14%, from 795 million to 905 million.  (These figures appear to be for world-wide use.)

Either way you look at it, debit cards are becoming more popular.  I stopped using my credit card four years ago, and I do not miss it.  I’ve managed to reserve hotel rooms with my debit card, and I’ve even researched how to rent a car with a debit card.  My current bank treats debit card transactions with the same security as credit card transactions.

As debit cards become more popular, I’m sure that debit card-related fraud will increase, as well.  Such is the nature of how the world works.  No matter the system, or mechanism for transferring money from one party to another, there are those who will find ways to manipulate that system or exploit that mechanism.  Keep this in mind when you use your debit card.  Be careful.  Be mindful.  Be smart.

I am not sure if this move towards debit cards is short term – driven by the recent downturn in the economy – or long term – signaling a move away from credit and towards paying with cash-on-hand.  It will be very interesting to take a look at Visa’s next SEC filing, to see if this is a trend, or a one-time blip.

What about you?  Are you using your debit card more than you used to use it, as compared to your debit card?  What are you worries when you use your debit card?  Do you use your debit card for online purchases, and if you do, do you feel comfortable when doing so?  Do you know your bank’s debit card security policies?

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