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I have been saving for some time now with the aim of building up enough money to begin investment. But the problem is I keep withdrawing money with my debit card whenever i want to buy something. Would it be better if i just snapped the debit card in two, so that i can concentrate on saving, just as i did to my credit card so long ago?

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    A more descriptive question title might be: "Is it a good idea to destroy my debit card to prevent overspending or spending my savings?" – SpecKK Sep 13 '10 at 23:31
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    been 'sober' for two weeks... – Chiddy Sep 20 '10 at 19:30
  • congrats Chiddy. There are millions of indebted Americans who wish they could have control over their money. – SpecKK Sep 27 '10 at 17:46
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    I would never ever use a debit card again. Why? Imagine the real situation (in the US, anyhow) where one family uses a debit card and the other a credit card, and one day each has their card stolen. They both notify their banks, but the thieves have used the cards already. Both families' banks are investigating the challenged transactions. But the credit card family has all their money still in the bank, while the debit card family has no money left in the bank. In the best case scenario, the bank returns the debit card family's money in a day or so... But... Who would you prefer to be? – Wayne May 17 '11 at 20:45
  • Continuing: In fact, depending on how their bank works, the debit card folks may have had their checking account drained, then their savings account drained with overdraft transfers, then perhaps even overdraft loans. Of course, both family's cards have been cancelled and they won't get a new one for days, but at least the credit card family can go to the ATM and get cash out to buy food and gasoline until things settle down. Like I said, banks are usually pretty fast on debit card investigation, but I'd rather have my money and they say I owe them than they have my money and I say they owe me – Wayne May 17 '11 at 20:48
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It's a real pain in the rear to get cash only from a bank teller (the end result of cutting the card as suggested). There is a self control issue here that, like weight loss, should ultimately be addressed for a psychologically healthy lifestyle.

You don't mention a budget here. A budget is one of the first tools necessary for setting spending limits. Categorizing your money into inviolable categories, such as:

  • savings (in a savings account separate from your debit/checking account)
  • home
  • auto
  • grocery
  • fun
  • stuff (clothes, toys, electronics etc.)

will force you to look at any purchase in context of your other needs and goals. Note that savings is at the top of the list, supporting the aphorism to, "Pay yourself first." Make realistic allowances for each budget category, then force yourself to stick to this budget by whatever means necessary. Cash in several envelopes labeled with each category can physically reinforce your priorities (the debit card is usually left at home for now). Roll remaining funds from each month over into the next month to cover irregular larger expenses, such as auto repairs.

What sort of investing are we talking about? If you are just talking about retirement savings, an automatic deduction of just $50 to a Roth IRA account at a discount brokerage every pay check is a good start. An emergency fund of 6 months expenses is also common financial advice, and can likewise be built from small automatic deductions.

In defense of wise use of plastic, a debit card can be a great retroactive budgeting tool because it records all spending for you. It takes a lot more effort to save and enter receipts for cash, and a compulsive spender without a budget is just as likely to run out of money whether or not he uses plastic. You could keep receipts in the envelope you take the cash out of when you're getting started.

If you are so addicted to spending that you must cut your debit card to enforce your budget, at least consider this a temporary measure to get yourself under control. When the bank issues you a new card, re-evaluate this decision and the self control measures you've implemented to see if you've grown enough to keep the card.

  • I keep mental track of my budget most of the time and usually just reconcile it at the end of the month. It's not as physically limiting as the money in envelopes, but if I've done a bunch of spending I'll check my debit/credit card registers online and see if I can afford more in that category. – SpecKK Sep 14 '10 at 18:44
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This sounds more like a behavioral than a debit card issue to me TBH.

Did you put the money you're putting away into a separate savings account that you (mentally) labelled 'for investment'? That's pretty much what I do (and I have a couple of savings accounts for exactly that reason) and even though I know I've got $x in the savings accounts, the debit card I carry only lets me spend money from my main bank account. By the time I've transferred the money, the urge to spend has usually gone away, even though it often only takes seconds to make the transfer.

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If your goal is to make it harder for you to use to make impulse purchases then YES. Having to always have cash for purchases will make you less likely to make impulse purchases you don't really need.

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If it is one of those debit cards you use just like a credit card without a PIN, I'd cancel it regardless of whatever you are trying to do with your finances. They just seem too dangerous to me.

Unlike a credit card, if someone makes fraudulent purchases on a debit card the money is gone from your bank account until you resolve the issue with the issue. With a credit card, the BANK is out the money until it gets worked out. My brother once had his credit card number (not the card) stolen and the criminals emptied his bank account. Eventually the bank put the money back after an investigation, but it had two really nasty side effects:

1) Dozens of checks bounced. The bank refunded the bounced check fees, but not all of the stores would.

2) He had no money in his account until it was resolved. Luckily in his case they resolved it in a few days, but he was already making preparations to borrow money to pay his rent/bills.

  • Crooks could just as easily empty your checking account with the numbers off of a single paper check. Should you destroy all your checks too? Electronic access to checking is a money security nightmare which no one appears to be interested in solving. Just keep the balance in your checking account relatively low for now. Diversifying to a couple of banks also seems like a good idea just in case something happens to your primary bank accounts. – SpecKK Sep 14 '10 at 18:40
  • @SpecKK - Good point. When are banks going to finally get on the ball and offer some real security for accounts? – JohnFx Sep 15 '10 at 12:56
  • sounds like a business opportunity... – Chiddy Sep 27 '10 at 12:25
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How about just stop buying stuff?

  • -1. May have been better as a comment. – Chris W. Rea Sep 16 '10 at 1:37
  • It's funny. It doesn't need any up votes since it's not informative, but I'm happy to let it stand. – SpecKK Sep 16 '10 at 20:26
  • This is the absolute correct solution. If you want to save money, but can't because you buy too much stuff... stop buying stuff. I'm not trying to be funny. – DexterW Sep 17 '10 at 18:23
  • think about your answer. if it were that easier very few people would be in debt. these are spending habits that have been acquired for, good or bad, over the years. why do you think there is a term like impulse buying or the extreme version shopaholic? – Chiddy Sep 20 '10 at 19:28
  • Cold turkey, baby. – DexterW Oct 12 '10 at 13:54
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Using cash instead of a debit card lets you see in real time how much cash you have left and where it's going. It's a lot "harder" to see the cash disappear from your wallet than it is to swipe the plastic (whether it's a debit or credit card). Using cash is a way to keep the funds in check and to keep spending within a budget (i.e. you can't spend it if you don't physically have the cash anymore).

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    The downside of that is that after your money's spent, it's harder for you to see where it's gone. The nice thing about a credit/debit/check card is that you can look at it later in a personal finance program and see facts like "good lord, I spent $90 at Waponzo's Hot Dog Stand at the beach this month! What was I thinking?" – user296 Sep 13 '10 at 19:37
  • @fennec the thing is even though you do see how much you have spent with receipts and bank statements. with raw cash you don't take an unnecessary amount. at the atm you can usually withdraw 20 - 50 - 100 etc instead of specific amounts, so you end up with the extra cash and you buy some mars bars at the counter or whatever and poof! the money is gone – Chiddy Sep 14 '10 at 9:59
  • @Chiddy - yes, I know. There's upsides and downsides to all strategies. :) – user296 Sep 14 '10 at 15:39
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Debit cards are the dumbest development ever. I now have a piece of plastic that allows any yahoo to cause me to bounce my mortgage. Great.

Throw away the debit card. Use a credit card and exercise some self control. Take out a sufficient amount of cash to cover your weekly incidental expenses under $50. If you want something that costs more than $50, wait a week and use the credit card.

You'll find that using cash at places like the convenience store or gas station will cause you to not spend $3 for a slim jim, lotto ticket, donut or other dumb and unnecessary item.

  • But wait, my bank will also charge me $36 to prevent an overdraft as a favor to me! They have sent me mailings and emails telling me how much of a favor they are doing for me by protecting my debit card with that feature. – MrChrister Sep 27 '10 at 17:15

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