Thirsty for Proper Perspective

Get Wise About Using Debit Cards and Online Banking

In 1997, a friend attempted to persuade me to get on board and join the revolution...the debit card revolution. No matter how much she explained what it was and how it worked...no matter how many times she tried to reassure me that it was not a credit card, I refused to jump on the bandwagon and go to my bank to sign up for one. I wanted nothing to do with a card that looked too much  like a credit card. I was sure that it was just as dangerous as a credit card, and I knew way too many people who were deeply in debt. I just didn't trust the plastic check card. I was convinced that having a debit card would be more trouble than it would be worth.

Fast forward to the present day and I have to admit that not only do I have and keep a debit card on me at all times, I have three of them! They're easy to get, convenient to use (gas station, anyone?), can sometimes be used for identification purposes, and make purchased items easier to track for people who don't keep up with their receipts. And who doesn't love the convenience of driving up to a teller machine to deposit cash or checks without having to fill out a deposit slip and wait for our turn with a bank teller?

For all of the benefits and conveniences debit cards provide, they have also been a source of many sleepless nights for account holders who have trusted them way too much...people who have failed to track their transactions, balance their accounts, and avoid accumulating overdraft fees. Last week, I took my own little poll and asked everyone I knew if they use checkbook registers or some other system to track their finances and balance their books. 98% of them said, "no". NO? NO! "What do you mean," I asked. Each of them gave me the same explanation:  they use online banking as their sole source of tracking and managing their finances. Can you believe that? I couldn't!

I asked each person how they account for outstanding transactions that haven't yet posted online. Some were convinced that they never have outstanding transactions, others relied on their memory, while others simply weren't sure. So, you probably won't be surprised when I tell you that 100% of them had overdrawn their bank accounts this year as a result of failing to keep up with their financial activities, 86% of them had overdrawn their accounts at least once within the past six months, and 54% of them have overdrawn their accounts within the past three months.

Can you imagine how much the banks have made by charging and collecting overdraft fees from these account holders who place all of their financial trust in online banking? Let's say 10 people fail to properly manage their accounts and each of them are charged two $35.00 overdraft fees in exchange for the same bank covering the costs of allowing all of their transactions to clear. The bank would earn a total of $700.00 in overdraft charges! That $700.00 could be charged and received by the bank for "insufficient funds" transactions that might cost them less than $50.00 in total to cover for those account holders.

For this very reason, I am encouraging more and more people to use their checkbook registers to record and manage their finances. No one cares more about your financial stability than you do so why not take responsibility for its success? If you hate the mundane, tedious job of writing down every financial action you take, spend a few dollars to purchase (and use) personal finance software (i.e., Microsoft Money, Quicken). You can also do a little research to find out if there are service companies in your area that can assist you in recording and managing your finances at a reasonable price. I provide such services for individuals and small businesses all the time. You'd be surprised by how affordable they can be (especially in comparison to regularly paying overdraft fees created by mismanagement). Besides, most people are better prepared and much more motivated to manage their own finances after approximately 3 months of personal finance training or services, and all of them feel better about having a financial reporting system that allows them to see how they're working their money and how their money is working for them.