If you are concerned about your financial health and yet, at the same time, like to spend and shop – using a debit card instead of a credit card can actually help to improve your overall financial health!
Here’s a list of four benefits that you can get out from using a Debit Card and how it can actually help to improve your financial health in areas like setting budgets, accessing your Wants & Needs and have enough to do a proper financial planning.
The Number One Benefit – Controlled Spending With A Debit Card
Why is that so? First you must understand – using a Credit Card means you get to delay your payments and you are allowed to accumulate (but subjected to compounding interests). Whereas for a Debit Card, the amount that you have spent is directly debited from the account that’s tagged to the card – if you have enough money in the account, it will always be a successful spend.
Therefore if you are concerned about your financial health but would like to enjoy the benefits of signing off your purchases, you can always create a special “spending” account and put in a fixed amount of money that you deserve to spend on a monthly basis. If you are disciplined enough to commit on this, you will get to see that your monthly spending is controlled by your own initiative and you have less tendency to spend out of hand.
The Number Two Benefit – No More Installment Plans
One good benefit of owning a credit card is that you are allowed to go on installment plans (up to 36 months) and most of the time, it’s interest-free! The only limitation is that you cannot exceed your spending limit (but you can always call the bank up to increase – a bad move). If you are enticed by this and go into a few installment plans, you will see yourself making lots of payments out to settle your buying desire – leaving you less to financially plan with.
To avoid such situation, using a debit card is a better choice. As mentioned in the first benefit, you get to control your spending with whatever balance you have in your bank account. If there’s a need to make a big purchase, save for it and at the same time access if this big purchase is a want or a need.
The Number Three Benefit – You Still Get Savings And Discounts From Using A Debit Card
Compared to using cash to spend, using a debit card has its own benefits as well – entitling you to savings and discounts for some of the purchases. For some debit card programs, some banks offer the benefit of getting some cash back from your purchases (ranging from the usual 0.3% to promotional rate of like 3% on certain day). There’s also the benefit of getting discounts at promotional events with the use of a debit card.
Though the savings obtained may be lesser compared to credit card use, it’s much better than spending with just cash. These extra and small bits of savings can really add up and contribute to your overall financial health.
The Number Four Benefit – You Get To Know What You Spend With A Debit Card
Spending with a debit card gives you the benefit of getting a monthly statement from the bank with the details of where you spend and how much you spend. Unless you are a person who keeps the receipts and a good record of everything that you spend, this monthly statement can actually help you a lot in assessing your spending habits.