Everyone knows the dangers of having too much credit card debt.
Well, I guess I should correct that statement.
Everyone should know the dangers, but apparently not everyone does.
If they do, they simply choose to ignore it.
That's probably why American consumer debt has surpassed the one trillion dollar mark, and the average American household owes over $7000 in credit card debt.
It's incredible how many families are struggling to pay off their debt each and every month.
That's why some families, though by no means all, have decided to change their strategy and walk away from the temptation of credit cards.
They've learned about the never ending cycle of debt and the unbelievable interest that consumers inevitably end up paying for those impulse items.
One way to enjoy some of the convenience of having a credit card without the prospect of getting buried into debt is to use a debit card.
This has become more and more common nowadays, and you probably already own one given to you by your bank.
There are certainly some advantages to using a debit card.
They can be used at just about any store that accepts regular credit cards, so you don't have to carry around a bunch of cash to make your purchases.
Because you're actually not purchasing on credit, there is no interest rate to worry about.
Debit cards simply take the money from your bank account.
Depending on your point of view, this can be a good thing or a bad thing.
The great thing from a financial planning perspective is that you won't be paying interest on the purchases that you make.
Also, because the money is withdrawn from your account immediately (or within a day or so), you become more aware of your spending habits and are more likely to think twice before making a purchase for something that you don't need.
Well, so far it sounds like debit cards are pretty great.
So what's the problem? The problem comes with a little feature of your bank account called overdraft protection.
If you're not careful, you can use up your bank account balance and even go past it.
If you don't have overdraft protection, your charges will simply be denied.
However, if you do have overdraft protection, the bank will temporarily cover the charges.
You'll have to pay back the funds plus a hefty charge for each overdrawn transaction you make.
It's a trap you should avoid, just like you should avoid traps laid out by credit card companies.
Well, I guess I should correct that statement.
Everyone should know the dangers, but apparently not everyone does.
If they do, they simply choose to ignore it.
That's probably why American consumer debt has surpassed the one trillion dollar mark, and the average American household owes over $7000 in credit card debt.
It's incredible how many families are struggling to pay off their debt each and every month.
That's why some families, though by no means all, have decided to change their strategy and walk away from the temptation of credit cards.
They've learned about the never ending cycle of debt and the unbelievable interest that consumers inevitably end up paying for those impulse items.
One way to enjoy some of the convenience of having a credit card without the prospect of getting buried into debt is to use a debit card.
This has become more and more common nowadays, and you probably already own one given to you by your bank.
There are certainly some advantages to using a debit card.
They can be used at just about any store that accepts regular credit cards, so you don't have to carry around a bunch of cash to make your purchases.
Because you're actually not purchasing on credit, there is no interest rate to worry about.
Debit cards simply take the money from your bank account.
Depending on your point of view, this can be a good thing or a bad thing.
The great thing from a financial planning perspective is that you won't be paying interest on the purchases that you make.
Also, because the money is withdrawn from your account immediately (or within a day or so), you become more aware of your spending habits and are more likely to think twice before making a purchase for something that you don't need.
Well, so far it sounds like debit cards are pretty great.
So what's the problem? The problem comes with a little feature of your bank account called overdraft protection.
If you're not careful, you can use up your bank account balance and even go past it.
If you don't have overdraft protection, your charges will simply be denied.
However, if you do have overdraft protection, the bank will temporarily cover the charges.
You'll have to pay back the funds plus a hefty charge for each overdrawn transaction you make.
It's a trap you should avoid, just like you should avoid traps laid out by credit card companies.
Source...