Those that are having problems with debt and need to quit using credit this will help in getting that problem solved. A debt reduction plan should be quit using credit, but this may be a problem for most people.
By Hiranmayi Srinivasan
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Hello, I'm your host, Mr. Chuck, I retired accountant turned truck driver, I reduce my debt in a relatively short period of time, debt reduction, to achieve financial freedom takes commitment, confidence, determination. When to use debit card versus credit card, those have been problems with that and need to quit using credit. This will help in getting that problem solved. A debt reduction plan should be quit using credit, this may be a problem for most people. If you have a debt problem, and you're starting a debt reduction plan, the first thing you need to do is quit using credit or quit creating new debt. If you're used to using a credit card to pay for your needs, a needs would be like your phone bill, your electric your gas, maybe even your rent. And then you're not able to pay off the credit card every month, your credit card balance is slowly increasing, creeping up. And before you know it, you have a debt problem. So let's start out is what's the difference between a debit card and a credit card. A debit card is issued by your bank where you have your checking account, it is linked to your checking account. It looks just like a credit card, with the only difference being on the face of the card, and it says debit. That means every time you use that card, money is being taken out of your checking account. A credit card is there loaning you the money for a period of time 20 to 30 days, will you pay it back in full, and then you won't have any interest though every credit card is different. Sometimes they charge interest from the date of purchase. Sometimes there's a 20 day grace period before they start charging you interest. But your credit card is you're borrowing the money and you have to repay back. A debit card is money that you already have, and is coming directly out of your checking account. Now if you're married and have a spouse, I recommend only one of you carry the debit card. And that should be the one that's most responsible, who is taking care of the checking account. Who is reconciling that out. Who knows how much is in there, when goes in when the bills are paid, that person should be the one that carries the debit card, so you don't spend more money than what you have. Now, some banks will stop you from charging something or buy in something. If there's not enough money in a checking account. Some banks will allow you to go over draft and then charge you an overdraft fee, etc. Or how you might have a set amount of money that you can cover. And then you have to pay back the loan to your bank. But we're trying to get away from all that and get your spending under control and know where your spending is coming from. Your name should be paid directly from your checking account. Whether you write a check and mail on and whether you pay it online and it's electronic transfer or you use a debit card. That's your needs. Your needs are housing, including utilities, telephone, cable, satellite, TV, all your utilities, those type of things, transportation, gasoline and repairs to your automobile plus your car payment and course food and clothing. So I have a link in my show notes to two articles that may help you understand what I'm talking about. So which one should you use? Because when you go to buy something, you have three choices. He can pay cash, he can use your debit card, or you can use your credit card. If you're having a debt problem and you're trying to get your debt under control, he can do not want to use your credit card because that would be creating new debt. So how are you going to get out of trouble? If you keep adding to the problem? My first article is real simple, when to use a debit card and when to use a credit card. Instead, it's from Citizen bank.com. And it's a decent article. And we go down a debit card using a debit card, you're trying to control your spending, which is what we're trying to do here, you can use a debit card for everyday purchases, especially if you think that using a credit card for all that time will lead you to overspend. I suggest using a debit card for your everyday expenses, except in high risk situations. It's much easier to track how much money is going in and out on a debit card. Chances are you know how much money is in your account and how much you're allowed to spend. If you're not careful, a credit card can enable impulse buying, because you give you access to money you don't have it is a loan, you can quickly fall into credit card debt and lose money on high interest and late payment fees. If you don't manage your spending properly, treat your debit card like cash. Do you have money in your checking account ready, readily available to cover your purchase? If so swipe away. That's why I say the person who is taking care of the checking account is should be the only person carry the debit card. Now how's the spouse gonna get by, if he doesn't have any cash, he's now use his debit card. And we don't want him to use a credit card. One of the tricks that I've done and couples can do the same thing, set up a second checking account. Give him an allowance, how much money can you afford to give your spouse to pay for the things that he needs to pay for maybe gas for the car, maybe some launchers, whatever. Figure that out in your budget, set up a second checking account. And every pay day, you transfer that amount of money for that time period. And to that second checking account, then he has his own account, his own debit card. He doesn't even have to keep track if you don't want to. He can just go and live normal life. And then when he runs out of money, it won't allow him to buy any more items. So then you're gonna slowly get your spouse spending under control because he's not gonna have an unlimited source, it will stop when he runs out of money. So see, you can set up a budget and figure all that out. And you really don't have to cut back here. We're just trying to keep this spending under control. You can use a debit card for withdrawn cash. Also, this might seem obvious but your credit debit card to withdraw cash. Again, make sure you're aware of your surroundings at the ATM or go to ATM and a bank to ensure your information is safe. You can use a credit card to withdraw cash but requires a cash advance kind of transaction that often comes with fees as well as high interest rates. He could also use your debit card at your grocery store and get cash back that way. If you can't get to an ATM, I know locally the grocery store I go to they gone there start charging a fee. If you take extra money out, they don't want you to do it because they don't have the cash. Credit card. A credit card is safer to use for online shopping. And I agree with that. Use your credit card for online shopping so you don't have your debit card information all over the internet. Chip enabled cards are very good at and they turning and pursuing fraud that doesn't help you online. And that's where most of the fraud is gone. Check your browser and shopping apps to make sure your debit card isn't saved as preferred payment and add your credit card instead. You can delete both to make it harder for you to overspend online. While using a credit card online is good advice. He should limit it because we don't want to create new debt. Only he gotta use it like cash. Only spend what you can afford to repay. And what I did when I was specially hammer problems If I bought something on Wednesday because I needed it, and I bought it online on Friday, whether it was payday or not, I won and, and I made up that exact amount of that purchase on that credit card, so that it did not add to my balance. So you can go online to your credit card, whichever bank it is, and make payments as often as you want. You don't you're not strictly restricted to one payment a month, you can make a payment every Friday if you want, you can make a payment every day if you want whatever the case, any reoccurring payments, you have such a subscription service, or renewed every month or a year like Netflix, Amazon Prime or Spotify are good to put on your credit card, especially an older one, they can no longer use as much recurring payments or keep that line of credit open. So you can continue to maintain or increase your credit score. As long as you make payments on time, make sure you check your credit card statement. So you know which subscription service you're being charged for. You can waste a lot of money in subscriptions you no longer use or forgot, you signed up for good point. Now the point here is if you're on a debt reduction plan, and you're quit using your credit cards, but you've got some online payments such those like Amazon Prime, Spotify, or Netflix is a good example. And you want to keep that subscription. And say it's a quarterly semiannual or annual payment. Once you get one of those credit cards paid off, use that credit card to for those subscriptions. And then make sure you check the statement every month and make sure you pay it off when no subscriptions are charged to that card. That way that car remains open. It helps your credit score, you have more available credit and you're making on time payments. Use a credit card in case of an emergency. If you have a debt reduction plan, you should have an emergency count, you should be fun in your merchant account. And your savings account, you do not want to use a credit card in case of an emergency, you might have a credit card that you keep a zero balance on that if you travel or go out of town you take with you. So if you have a flat tire or something, you can charge at 60 a car and then pay it off with the money out of your savings account. So you can maintain a zero balance on that card. It is okay to use a credit card for everyday purchases that you can pay off. I disagree, don't go there don't do it. The idea of using it for everyday purchases that you can pay off. Well, apparently you've done that in the past, you got yourself a debt problem, you're trying to get out of a debt problem. So this is what we want to stop doing. Quit using your credit card for everyday purchases. Even if you think you can pay them off, we're not doing that. Use your debit card, because the number one rule on debt reduction plan is quit creating new debt. Quit creating new credit, quit using credit on a whim. That's what you're trying to get away from. Remember, the debt reduction plan is quit creating new debt. make the minimum payment on all your credit on all your debt, all your loans no matter what fun in emergency account, set up a savings account and get a minimum of $1,000 build up in there and then quit then continue building it up until you have two or $3,000 over that $1,000 For so you have at least 3000 to $4,000 all your bills are paid up and timely. And then you take the excess out the two or 3000 and you apply it to one of your debts that you want to pay off first member in the planning stage you figured out the order in which you want to pay off your debt. Whether it's the highest interest rate first or the lowest balance first. Whatever you did sign it stick to your plan because that is what you want to do. And our citizen banks The first one was from real simple, I'm sorry. And the second one is here, citizen bank wallet roulette. When do you use cash, credit or debit. Most people use cash for very small purchases. Because most people only carry maybe 20 or $40. With them at any one time, a debit card is reliable and safe. Most debit cards are free and included in your checking account. So you don't have to apply for one undergo a credit history check or pay an annual fee, all you have to do is activate your car and it's ready to go. Using debt means you're directly drawn from available funds, which is a boon for people trying to budget, build up savings or avoid credit card debt. Not only are you spending within your means, but you can track that spending in real time. So there aren't any surprises at the end of the month. Again, do not rely on your bank, checking online account to track your spending. You need an app where you do that separately. Why? Because you want to categorize your spending. So you can do a report so he can do a budget. A budget is your control panel. Your app where you do your tracking is the lifeline of your personal finances. Again, if you're married and you have a spouse, only one of us should be carrying a debit card from your main checking account, and that should be the person who's taking care of it. Who knows how much money is on there, who knows what bills are coming up and do in the near future, and how much you need to pay those bills timely. Because when you're on a debt reduction plan, the first thing you got to do is quit creating new debt and make all timely payments. If you just focus on your needs for now, housing, transportation, food and clothing, don't worry about your wants because you're not going to do them. Your that's where you're gonna cut back some you're gonna go through you're spending your pass history, and you're gonna get away from those subscriptions so you're no longer using forgot that you signed up for whatever the case, cancel them so you don't pay for him any longer. Save some money, build up your emergency fund, apply it to your debt, and it's a cycle that keeps going on and on and on. Cash is green convenience. He loves the multiple cars and electronic payments or disposal you still need or want to reach into your actual wallet to pay money. Paper money on occasion. carrying some cash but not too much at a given time can save you from unexpected challenges. You never know when a credit card processing system will be unavailable. Or when you're traveling through a remote place without an ATM or an another emergency situation suddenly makes other methods of payment unusable. There are still some restaurants and other business that only accept cash or require a minimum purchase before you use a hard at first to have Yeah, you're gonna meet that minimum purchase. Credit card it gives you more purchasing power gives you an extra boost when your cash reserves are low. That's your borrowing money. Yet this with this power comes greater personal finance responsibility. Given added fees, it's important to offer cars with low interest rate especially if you're carrying monthly balances. You don't want to carry monthly balances you want to pay him off every month. He only wants to spend what you can afford to pay your debit card is cash. He should treat a credit card just like cash no matter what. Another time to swipe your credit cards when making a reimbursement purchase for work that you don't want to spend your cash on. using credit cards for international travel or other sized transactions. Transactions may be a better exchange rate. However, check to see if your card charges foreign transaction fees, security features and consumer protection for debit and credit cards. Both debit and credit cards simply come as federally required fraud protection and around the clock fraud monitoring. All debit cards and some credit cards require a personal identification number pen at the point of sale which makes it harder for a creditor to steal and use your card information so that any fraudulent charges appear on any type of card your card issue or financing, or typically refund you however if the fraud charges are made with your debit card, your account balance may be temporarily reduced while the fraud is resolved which could affect your ability to pay bills or make purchases. So you got to be careful use your card with watch of the your surroundings around you. I've never had any trouble. Only problem I have was probably mostly because of online stuff I did. And then my card got my card information got stolen online, and then they tried to buy stuff overseas. And I saw that right away. And I called it and put a stop to it. And again, that's another reason why you need to check your online accounts for all your credit cards every day, or at least every other day, to see if there's any charges on there that you did not make. That's another part of your debt reduction plan. That's another thing if you're not using your credit card, and you check your credit card statement, you go online, you log in, you see there's couple charges, and they were like a day ago. And you know, that wasn't you and you know, you don't know anything about it, you need to call and report that and they will put a block on that I know it's a pain, then they will issue a new card, a bill will be the same account. But you'll have a different card number. And they will mail it to me it takes a week or two. But if you're not using your credit card, it doesn't really matter. You're just trying to keep things under control. You don't want to pay for somebody else's lifestyle. I'll be back in one moment with my final thoughts. If you want to contact me to request my spreadsheet for the budget, or leave a comment or ask a question, you can send it using my email, reduce debt, increase email@example.com. reduce debt increase wealth is all together no spaces. If you like to ask a question, quick question in the subject, if you'd like to request my monthly budget, but spreadsheet in the subject matter if you want to leave a response of any kind is put a comment in the subject manner. I will get back to you as soon as possible. Remember, a debit card is money coming directly out of your checking account. And a credit card is a loan to you from Visa, MasterCard or whichever the bank that issued that credit card. If you're trying to reduce your debt reduction plan, if you're trying to reduce your spending, and you're trying to control what you're doing within a budget, if you use in your debit card, that's the same thing as using cash. That's why I say only one spouse should carry the debit card and should be the spouse that is taking care of the checking account that he's using the app and recording all the deposits and all this withdrawals with and that checking account and knows what's coming up what's due next, what bills are coming up how much money is needed for, say the mortgage car payment, groceries and gasoline. And you should set up a separate checking account for the spouse once every pay transfer a set amount of money in there. And that is what they use for their spending. We're trying to keep things under control. With any personal finance item, you need to keep track of what's going on. Whether it's a debit, a checking account, two checking account, three credit cards, whatever it is, you need to have a separate app away from the bank away from the company issuing whatever it is you're using. As you can see, you might have one bank account, but you could have three different credit cards. So it's kind of hard to look at how much you owe and four different places. So if you put it all in one app, and you can see you have $2,000 in your checking you got $3,000 in your savings, you owe $2,000 dollars on credit card a 1000 and credit card B and 1500. And credit card See, whatever it is, is all in one place, you can go in and look at the detail. You know what you spent money on, you can categorize that. So that you can set up your control panel, you can set up your budget much easier. I call the budget a control panel, because that is where you're going to from month to month compare what's going on. And that's where you kind of try to see where you're overspending money and try to get things under control. I know it's tough, it kids should be able to do this 30 minutes a week, if or less. The more you do it, the more often you update all these accounts in that particular app, the more precise your budget becomes, the more accurate when I say precise, I mean accurate, almost down to the penny with if you can get it within five to $20 You're doing pretty good. from month to month, you'll know where your money's coming from and where your money is gone, you'll have a good idea of the extra money you have available. Whether you put it in savings, to build up your emergency fund, or to pay down debt in the future, or to save whatever it is you want to save for, for your goal. You have it right there in front of you. And it makes life so much easier when you do this. I know it seems like a pain. But the app where you do all your tracking is the lifeblood of your personal finance. And your budget is to control center where you can control and keep track of everything. And once you get used to doing it, it becomes second nature. It takes very little time. You have control over your finances, and life is good, and you'll be glad you did. So