How to Keep Your Money, Part 1: Don’t Use Your Debit Card

If you want to avoid hemorrhaging money the way Bruce Willis leaked red-tinted corn syrup in Die Hard, then really, you need to have a budget. But that isn’t what we’re going to talk about today. We’re going to start small with discipline, and take small steps. The first step is putting away your debit card.

“But Penny!” you exclaim somewhat inaccurately (Penny isn’t my name, but given then name of my blog, I might as well go with it), “What’s wrong with a debit card? It’s just accessing my bank account! It doesn’t even cost me anything!” And there, my friend, you would be wrong. As wrong as Hans Gruber, to extend the Willis-movie similes.

First of all, check your bank statement. Know what your fees are for. Some banks do carry a charge for you having the convenience of a debit card. Hm. They charge you for saving them the trouble of taking out your money through a teller. Thanks, banking industry! Of course, even if they charge, you may decide it’s worth it to keep the convenience of being able to take out money at any time. I certainly can’t argue with that.

The first big problem with debit cards is that they make us sloppy with our money. The convenience is really, really tempting. If I use my debit card at WalMart, for instance, and you ask me five minutes later what the total was, I really wouldn’t be able to tell you. What did the total matter? I just swiped my card and it went away, like Hans disappearing out an open window.

Okay, I’m really going to stop with the Die Hard references now.

Now, if I have cash from my grocery budget in my wallet and I use that to pay for my purchase at WalMart, you can bet I’ll know the total. Nothing gives you a cold slap of reality like handing over $125.48 to the clerk, realizing that that was a quarter of your food budget for the month. It really makes you think twice about whether you actually needed all the things you tossed into the cart. I’m looking at you, Shrek the Halls DVD with Shrek beanie. Sheesh.

But that’s not the only problem with debit cards, just the biggest and most nebulous one. The second big problem is hidden fees.

We already talked about the possibility that you’re charged just for having the card. The other fees can be broken down into two categories: the fees other banks charge you for using it, and the fees YOUR bank charge you for using it. Usually, you’re getting hit by both categories at the same time.

Be honest. How often do you actually use your card at one of your bank’s ATMs? Do you go out of your way to hit your bank for cash, or do you just stick the card into any machine handy? Every time you use an ATM not owned by your bank, you’re paying a fee. Sometimes a pretty hefty one. And at least the other bank’s machine is nice enough to tell you that fee up front. Adding insult to injury is the fact that your bank is probably adding another fee that they don’t tell you about.

This is where checking your bank statement becomes important. Check to see if your bank is adding charges (mine charges $1.00) when you use a different ATM. I used to congratulate myself for getting cash back with my purchase at fee-free places like WalMart or the grocery store; that warm, smug feeling pretty much disappeared when I realized that my bank was slapping charges on those withdrawals as well.

Let’s take a worst-case scenario, and see how much money tossing around your debit card can cost you in a month:

Let’s say you take out some cash every three days or so, just enough to keep you going. Let’s say you’re really careless and never use your own bank’s ATMs.

10 ATM withdrawals: $25 in service fees from other banks, $10 in fees from your bank

Cost: $35

One overdraw, buying something before your paycheck clears, but you weren’t keeping track of the money in your account… Whoops!

Cost: $30

You use the debit card at the gas station, and the bank arbitrarily puts a $75 hold on your account for UP TO THREE DAYS (this has happened to me!). You try to use the card elsewhere, and guess what? You’re short!

Cost: Priceless.

In other words, THESE THINGS ADD UP.
To sum up, here’s a good way to save money: Get cash out of your bank account once or twice a month, at YOUR bank. Figure how much you’ll need. You can get more later if you have to, but the idea is to keep the damn card in your wallet. Only use the card at your bank, for really large purchases that you’d be insane pay for in cash, or for budgeted items (For instance, our gas is always cheapest at Costco, but they don’t take cash. We budget on leaving the gas money in the checking account for that reason.).

 

Your wallet will thank you. And that’s just a little thing! Imagine how good your wallet would feel if you got rid of the credit cards!

Okay, I promised myself I wasn’t going to scare you that bad just yet. Small steps.

Yippee-ki-yay.

The Term “Cheap” Is So… Well… Cheap.

I’m a pretty normal person. Married, mortgage, one child. But I have a dark secret. I’m thrifty.

I’ve clipped coupons, taken surveys, shopped at scratch-‘n’-dent groceries, and even dived into dumpsters. I’m by no means the tightest wad out there, but while I’ve never really pinched a penny until it screamed, I’ve certainly taken great pleasure in making one whimper on occasion.

I am a thrifty person. Just don’t call me cheap.

I’m doing this blog to share the best ways I’ve found to save money, to save effort, and to get stuff for free. If any given entry I write makes you roll your eyes and go “Well, duh,” then congratulations! You’re thrifty too, and probably internet-savvy as well.  I’m trying to do this for everybody, especially people who may be jumping on the thrifty bandwagon for the first time due to recent economic unpleasantness. So join me on my gently-used magic carpet ($35 on Craigslist, and I only had to have it cleaned twice to get rid of all the cat dander), and let’s go on a thrifting adventure! Bring small bills. Your debit card carries too many hidden charges, but that’s a different post.