Posts Tagged ‘line of credit’

Debit cards: Pros vs the Cons

Debit cards are useful in a lot of ways. For instance, a payday loan can be deposited into your bank account within hours of your online loan application being approved. It’s your money, spend it how you wish, whether it’s a cash withdrawal, personal check, or debit card. During this recession, many have begun using the latter more and more instead of making credit card purchases. Some are already familiar with the convenience of plastic, but may not know the pros and cons of debit cards.

Pros of debit cards

Debit cards can hamper impulse spending. They can’t eliminate this problem, but their use can curb it to some extent. Debit cards, unlike credit cards, will only cover purchases if the money to cover it is in the bank. A debit card is tied to cash, in that money is deducted (or debited) from your account after the transaction. This is unlike credit card spending, which allows a certain spending limit followed by installment payments to pay for charges later. A debt card lacks this feature. As a result, for most people, this means thinking twice before spending cash that will severely skew their budget.

Merchants that don’t accept personal checks are more inclined to take debit cards for transactions. This makes using debit cards as convenient as a credit card at the point of sale. Debit cards can be referred to as Visa check cards, and have the Visa logo, and others have the MasterCard logo. This means that wherever MasterCard or Visa is accepted, debit cards with the logo is accepted there as well.

The cons of using a debit card

Unlike what is offered with most major credit cards, cash advances or a line of credit is not offered to debit card holders. Therefore, when emergency cash is needed or when fast cash is needed to help a person survive until their next paycheck, a debit card is of no help. However, a person in this situation, even with bad credit, may be able to consider a loan till payday or a cash advance from a company offering personal loans.

Federal regulations, which protect credit card consumers, do not apply to debit cards. This means that in a dispute over charges, the consumer has little recourse once money has been debited from their account.

Banks that issue debit cards with checking account sometimes assess fees when the cards are used. While this practice is becoming more and more obsolete, consumers are advised to check with their individual bank before using debit cards and accruing possible fees. Be sure to ask about using the card to get cash from other banks or ATM machines. Some don’t impose fees on transactions, but it’s common for banks to charge when a card is used at another bank or a private ATM machine.

A debit card that gets lost or stolen can be quite costly, depending on the state you live in and when it goes missing. While very limited protection may be offered, consumers should be aware of their level of protection ahead of time. For instance, if someone does not report their card missing within 48 hours of a thief taking it, it is possible for the original card holder to be left with some or all of the liability on purchases and cash withdrawals made by the thief. The liability depends on the bank’s policies and state laws governing such limits.

While debit cards definitely come with advantages, such as providing immediate access to cash advance or personal loan deposits, the drawbacks involved with using them can be costly if a person is not very careful. Overall, however, they offer freedom from high interest rates while offering many of the same conveniences as a credit card. Debit cards don’t help you build credit, but they also don’t have the risk of damaging credit as credit cards do.

The average American household has nearly $10,000 in credit card debt, and many people are only able to make the minimum payment of 2% of the balance. Even 2% is $200, and by paying the minimum payment, you could be paying on the balance for decades before you finally pay it off. Since new legislation will make it more difficult to file for bankruptcy, it may occur to savvy debtors to try to negotiate a good proposal with their credit card company in order to make it easier to pay off the balance. Is this possible?

It might be possible, depending on your credit history, interest rate, and current balance. If you have a history of paying on time, then you can easily get lower interest rates by calling your company. They might, especially if you tell them that you got a better offer from another bank. If you have a history of paying late, however, they probably will not be willing to lower your interest rate. May be credit company has raised your interest rate because of your late paying habit. Still you can try may be you are lucky.

If you’ve been paying your bills on time, asking for a lower interest rate may be the only option available to you. The credit card companies aren’t going to be too sympathetic to your financial woes if they’re receiving payment on time. On the other hand, if you’re late on your payments, especially if you’re more than three months behind, you may have some negotiating leverage. That leverage comes with a few strings attached, however. You may be able to negotiate a lump-sum settlement for your outstanding balance, where the credit card company accepts a portion of your debt and writes off the rest. They’re often willing to do this instead of turning your debt over to a collection agency, as it’s cheaper just to settle. The negotiation amount will depend on your balance, your interest rate and your payment history. This type of agreement comes with a couple of problems of its own, though. What if you can not pay the settlement amount at once? If you are late in payments the probably you do not have the cash to settle at once. Additionally, the amount of your debt that gets written off will show up on your credit report as bad debt, and that will stay there for seven years.

Your credit card company may or may not be ready to work out a settlement plan, but it costs you nothing to ask them, and negotiating a settlement with them may be cheaper for you than if you consult with a debt consolidation firm. If your credit card debt is big and you just can not make the payments, it is worth a try.