Tag: Debit Cards

 

Why You Should Spend With Your Debit Card vs. Credit Card This Holiday Season

The holiday season is approaching and you know what that means — spending money. Whether it’s buying gifts for loved ones or booking flights to travel home, the holiday season typically means a spike in spending for many of us.

And, because you may spend more than at other times of the year, you’re probably going to use credit cards. But, did you know that while credit cards offer some cool rewards like cash back, using your debit card is often a wiser choice? Read on to learn why.

1. You spend only what you have

Everyone wants to think they’re responsible with credit and only buy what they can afford. Well, a lot of people are wrong. According to a 2017 study by Magnify Money, 68 percent of consumers attributed their holiday debt to credit cards.

Of the consumers surveyed, 44 percent racked up more than $1,000 and five percent accumulated more than $5,000 in credit card balances. More disturbing is the fact that half of those consumers noted that it will take more than three months to pay off the debt they accrued during the holidays. That’s more than a quarter of the entire year!

When you use a debit card, however, you spend only what you have in your bank account. And, this helps you become more mindful and realistic about your budget. Using a debit card during the holiday season can also help you avoid fees and that dreaded holiday credit card debt.

2. You don’t have to worry about making another payment

The holiday season can make the most organized person run around like a headless chicken. Everyone’s schedule seems packed to the brim and there’s always something else added to the to-do list (Think: “Buy white elephant gift for the company party.”)

When you’re so busy, some of your normal day-to-day duties can fall to the wayside. And, if you don’t have auto-pay set up, you can potentially miss a credit card payment. Another common problem during the busy holiday season: You say you’ll “do it later” and then when you remember to pay your bill, it’s late.

When you use a debit card, however, you don’t have to add anything else to your to-do list – including making yet another payment. The money comes straight from your bank account and you don’t have to do a thing.

3. A debit card is free to use

One of the biggest perks with using credit cards is the rewards, like cash-back and airline miles. But oftentime the best rewards cards come with an annual fee and the conversion on the rewards isn’t as great as you think. In many cases, miles are literally worth about a penny per mile or less.

So, you may actually be spending your money on an annual fee, high interest rates, late fees, and more – without getting much in return.

Here’s where debit cards take center stage. Debit cards are free and can help you avoid debt.

4. Your debit card can help you save

At Chime, we’re all about helping you save money when you spend money. It’s all about balance. Am I right?

With this in mind, check out Chime’s round-up savings program, where every time you use your debit card, we round-up the purchase to the nearest dollar and put it into your Savings Account. This way you can effortlessly save and know that you’re being financially responsible at the same time.

5. Stop fraud instantly

There are no two ways about it: Fraud can be rampant during the holiday season. A lot of credit card enthusiasts think this is a solid reason to use credit over debit.

But, your debit card can offer protections that are similar to your credit card. For example, if you suspect any fraudulent uses on your Chime card or your card goes missing, you can simply go into the app and immediately put a halt on purchases by disabling transactions. No need to stay on a long customer service line (who wants to talk on the phone?!) and no need for lengthy emails. Just put a stop to it, now.

Not only that, but Chime alerts you any time you use your debit card. So, if your debit card get into the wrong hands, you’ll know right away.

Bottom line

The holiday season should be a time of joy and fun, not stress and debt.

Using debit instead of credit can help you keep your spending in check, plus you’ll have one less thing to worry about. So, this holiday season: Try spending only what you have and enjoy the season with family and friends. It sure beats worrying about money!

 

Why Debit Cards are the Best for Budgeting

Everyone has different methods of managing their finances. Some people swear by the cash envelope system, while others put everything on credit cards with the aim of paying them off in full each month.

Yet, perhaps the most underrated way to stay on budget is to use a debit card that links directly to your savings account. This way you can readily keep tabs on your daily spending as your purchases come right out of your bank account.

According to Nasdaq, banking institutions in the United States issue over 165 million debit cards each year. So, you likely already have a debit card and this may become your best friend when it comes to controlling your spending.

Here are 5 reasons why debit cards can help you stick to your budget.

1. You can easily track your spending

Perhaps one of the biggest advantages of using plastic versus cash is that you can easily track your spending without having to carry around wads of dollar bills.

Every time you swipe your debit card, your transaction is tracked. When you go to view your bank account online or your monthly bank statement, you can see just how much money you spent, and where. While you may not be able to easily discern exactly what you bought (that’s when you can look at your receipt), keeping tabs on your bank account debit transactions provides a good starting point to figure out where you are potentially spending too much money.

2. You don’t have to worry about going into debt

Unlike credit cards, debit cards only allow you to spend the money you already have in your bank account. If you try to spend more money than what you have, you may be charged a steep overage fee, depending on how your account is setup. While overdraft fees can be costly, these fees are typically not as expensive as the amount that credit cards charge in interest (which in 2018 was nearly 17 percent!)

Credit cards impose a “credit limit” on consumers. This is the limit on how much you can borrow on your credit card. Your credit limit is determined based on a number of factors, including your credit score and credit history. And, oftentimes credit card users spend more money than they can afford to pay off each month. When this happens, you’ll get charged interest. Interest is the money credit card companies charge you for carrying over a balance from month to month. With the average credit card interest rate of 16.71 percent, it can be easy to get stuck in the cycle of debt.

With debit cards, your “debit limit” is the amount of money you have in your bank account. If you don’t have the money available, well, you won’t be able to spend it. This may not sound like much fun, but it will certainly help you avoid the same type of spending sprees that often occur with credit cards.

3. You don’t have to carry a wad of cash around

On the other end of the spectrum, cash budgets are preferred by many people who don’t feel like they can keep a handle on credit card spending.

Yet cash comes with its own set of problems. For example, the cash envelope system is a popular way of budgeting, but it requires you to have a significant amount of cash on you at all times. Here’s how this type of budget works: you stash cash in individual envelopes for each area of spending, such as groceries, gas, fun money and clothing. You only put as much cash into each envelope as you have budgeted for that particular category each month. Once you are out of money, you’re out.

Indeed walking around with envelopes of cash to pay for things is enough to make anyone sweat, as you may worry about losing your money or having your purse or wallet stolen. Once your cash is gone, it’s gone.

4. You can count on ease and convenience

Counting your actual dollars and cents takes a fair amount of time when you’re standing at the register in a store. Debit cards, on the other hand, are convenient and transactions are quick to process when you’re making a purchase.

5. You can sync your debit card with budgeting apps

Finally, if you prefer to use budgeting apps to keep track of your finances, your debit card may be the perfect solution for you.

It’s impossible to sync a cash-only budget to an app. You need to have a budgeting app linked to a credit or a debit card in order for it to automatically update. While debit cards can’t list out every single individual purchase you make, they can connect to budgeting apps that can help you distinguish where your money is going.

Digital apps take the grunt work out of budgeting. Instead of having to track every individual expense, you can let an app do the work for you, saving you a ton of time and effort.

Should you use a debit card for budgeting?

Depending on your spending habits and preferences, a debit card may be a great way to help you stick to your budget.

You may be surprised at how much money you can save by simply tracking your spending using the debit card you most likely already have in your wallet. It certainly doesn’t hurt to give it a try, right?

 

Prepaid Card vs. Debit Card vs. Credit Card

Some people use personal finance terms interchangeably like ‘checking account’ and ‘bank account’ or ‘interest rate’ and ‘APR’. In these instances, this is understandable.

Yet, when it comes to prepaid, debit and credit cards, it’s important to note that these cards are not the same thing. While they all may show a network logo like Visa, MasterCard, American Express, or Discover, these three types of cards are actually quite different.

With that said, these cards do have one thing in common: if you’re not using cash, you’re likely using one of them to make your purchases. Read on to learn more about the differences between prepaid cards, debit cards and credit cards.

Debit Card

A debit card is linked to your checking account through your bank. When you use your card to make an in-store or online purchase, the money gets deducted from your bank account. You can also use your card at an ATM to withdraw cash.

If you happen to spend more than the amount in your account, you may be charged an overdraft fee. Chime Bank provides one of the few debit card options that doesn’t have overdraft fees. Chime also offers fee-free ATM withdrawals at all MoneyPass ATMs.

Prepaid Card

Prepaid cards are not linked to your checking account so you don’t really need a bank account to have one. With a prepaid card, you load money onto the card and then use it to make purchases or withdraw money from an ATM. You can put money onto your card with any of these options:

  • Arrange for a paycheck or regular payment to be directly deposited onto the card
  • Add funds at retailers or financial institutions like a Walmart or currency exchange location
  • Use a reload card which works just like a gift card (it contains a code that becomes linked to the amount of money you paid the cashier. You can then load the card over the phone using your code)
  • Transfer funds from an existing bank account

Be mindful that some loading methods may come with a small fee.

Credit Card

A credit card allows you to make purchases by borrowing from a credit limit instead of using the money you have in your checking account or funds you loaded onto a prepaid card.

With a credit card, you’ll have a minimum amount that you are required to pay each month (reflected on your bill), but it’s a wise idea to try to pay off the entire balance if possible. It’s also important to note that you’ll receive a certain limit when approved for a card. You can then spend up to this amount regularly so long as you make your minimum payments on time.

For example, if you get a credit card with a $1,000 limit, this means you can spend up to $1,000 on the card. While you can carry your remaining balance over to the next month, you will be charged interest on the balance until you pay it off. This is why it’s recommended to purchase only what you can afford to pay for within a short period of time – preferably during that same billing period.

A good rule of thumb is to only borrow up to 30% of your credit limit and try to pay the bill off in full each month. So, instead of spending your entire $1,000 credit, you may want to spend $300 or less and pay the bill off in full at the end of the monthly billing cycle. According to Experian, this is called credit card utilization and it’s a common factor when determining your credit score.

Credit cards can help you build your credit and demonstrate that you are a trustworthy borrower. In fact, credit card companies report your borrowing and payment history to the three major credit bureaus and this helps shape your credit score.

One final note about credit cards: when you decide to apply for one, make sure you understand all the fees and terms.

Prepaid Card vs. Debit Card vs. Credit Card

As you can see, there are quite a few key differences between the three cards above, so let’s discuss them in more detail.

A prepaid card is different from a debit card based on the fact that you don’t need a bank account to have a prepaid card. And, when you get a prepaid card you won’t be subject to any credit checks or inquiries into your banking history because you are using loading your cash onto the card. Another perk: you may be able to deposit your paycheck right onto your prepaid card.

While prepaid cards can look and feel like debit cards, they aren’t as safe as debit cards. Why? Since debit cards are connected to your checking account, you can easily monitor your account and spending online for free. Your money will also generally be protected if your debit card gets lost, stolen, or wrongfully charged.

However, the Consumer Financial Protection Bureau (CFPU) has put new rules in place to make prepaid cards safer for consumers. These new rules are set to go into effect on April 1, 2019.

Now let’s talk about credit cards vs. debit cards.

Credit cards are different from both prepaid and debit cards due to the fact that when you use a credit card you are borrowing money while hopefully building a solid credit history. Better yet, many credit cards offer rewards in the form of points or cash back that can be redeemed for statement credits, travel, or merchandise. Some people like to use credit cards to purchase groceries, gas, and other everyday needs in order to rack up reward points.

As long as you’re not overspending and can pay your bill off in full each month, there’s nothing wrong with using this strategy. However, if you struggle with controlling your spending, you may want to steer clear of using credit cards for your daily purchases.

Instead of credit cards, consumers often choose debit cards for everyday spending. Why? Debit is safer than cash, you can monitor your activity online with mobile banking, and you can choose a bank that doesn’t have fees.

Which One Do I Need?

If you’re not going to be using cash 100% of the time, odds are you’ll need one of these three cards.

Some people start with a prepaid card, but most choose a debit card that’s connected to a checking account for easy access to their money. Still others prefer a credit card, especially if it offers perks and rewards.

We’ll leave you with this thought: you may want to consider using two or all three of these cards for different types of spending. The bottom line: the best option is the card that works best for your spending and lifestyle habits.

 

How To Manage Your Money With Chime’s Mobile Banking App

Let’s face it — managing your money isn’t something that you’re taught in school (but learning about isosceles triangles sure came in handy.) Yet, learning how to manage finances is key to proper adulting.

Indeed, the best way to manage money can seem like a process of trial and error. But here’s a secret: using the right tools can make it much easier. That’s right. There are financial tools out there that can help you learn how to manage money and simplify the whole process.

Where should you start? With your bank. You may not realize it but your bank account is part of the foundation of your financial life. If your bank isn’t helping you manage your money, you can feel lost at sea. But with the right bank account app? You can get on the path of financial freedom and be the boss of your money.

Perhaps the best example of this is with Chime Bank. So, let’s dive in and find out how the Chime bank account app can help you manage your money.

1. Take control of your financial life

It’s time to take control of your financial life and make money moves that will benefit you now and in the future. Unfortunately, traditional banks make going to the bank seem like a pain. You may not like going to in-person branches, waiting in lines and dealing with tellers that treat you like a number. And, while traditional banks may have online banking apps, many of them are clunky and not very user-friendly.

When it comes to online banking apps, you’ll want to look for one that’s flexible, convenient and accessible. It’s also important that the app is intuitive and just makes sense. Chime’s online banking app fits the bill. It’s easy to use and works with your lifestyle so you can take control of your financial life.

Some other perks: you can cash checks on the go and easily transfer money from your Spending Account to your Savings Account. Plus, if you’re out to dinner and need to pay back a friend, you can easily transfer money to that friend using the Chime banking app.

Chime can help you stay on top of your financial life and make managing your money easier and convenient. No more bank visits, frustrating online apps or confusing websites. Chime has one of the best mobile banking apps, giving you the power to take charge of your money.

2. Know where your money is going

Wondering how to manage money? The first step is knowing where your money is going. But tracking can be tedious. Using the Chime bank account app, you know where you stand with your money at all times and where your cash is going.

You can get instant transaction alerts when you use your debit card. Not only that, but Chime sends you daily updates on your bank account balance.

So there will be no “OH MY GOSH how did my bank account balance get so low?!” moments. You won’t be left in the dark.

3. Avoid hidden fees

Benjamin Franklin said “Beware of little expenses. A small leak will sink a great ship.”

Perhaps the most annoying little expense is a hidden fee that you didn’t know about. This includes monthly maintenance fees from traditional banks — like, aren’t they supposed to maintain your account anyway regardless of how much is in your account? Isn’t that a bank’s job?

But at traditional banks, fees are everywhere. From monthly maintenance fees to overdraft fees, to ATM fees and foreign transaction fees. All of those fees can add up and cost you. In fact, the average household in the U.S. pays an astonishing $329 in bank fees every year.

When you’re trying to get your money right, you need to keep all the coins you can. Keep in mind: you’re the one trying to pay down your student loans, get out of credit card debt and save for that trip to Aruba you’ve been dreaming about.

With Chime online mobile banking, you can ditch fees forever. Seriously. No fees. No surprises. You can take that money and put it toward debt, savings, or something fun just for yourself. All of that money adds up and can make a difference.

4. Make the most out of payday

What’s your favorite day? When asked that question, most people would say “payday.” There’s something exhilarating and calming about knowing that money is hitting your bank account. It’s your reward for your hard work and a job well done. And, it also helps you pay your bills.

Imagine if you could get paid two days before payday. How exciting would that be? What could that do for your cash flow, your ability to pay bills faster and save more money? At Chime, we know the benefit of getting paid early. This is why we’ve created Early Direct Deposit. When you sign up for this option, you can get paid up to two days before your payday.

Your funds won’t be held hostage and you won’t have to deal with pesky physical checks. Getting your money early can help you take action on your financial goals.

Pay bills. Save money. Spend on the stuff that matters to you most. All without waiting for the money that you earned. Sounds like a win, right?

5. Supercharge your savings

You want to save for a rainy day. Save for your future. Save for your friend’s wedding next summer. Save for a ticket to Burning Man. It can all seem so overwhelming if you’re trying to figure out how to manage finances.

Using Chime’s online mobile banking app, you can save easily and effortlessly for everything you want. We have a Save When You Spend feature which rounds up your transactions to the nearest dollar and transfers that money from your Spending Account to your Savings Account.

So, if you go out for coffee and get a cappuccino for $3.75, that figure will be rounded up to $4 and twenty five cents will be transferred to your Savings Account. While that may not seem like a lot, your collective transactions add up and you’ll save a good chunk of change before you know it.

On top of that, you can automatically save 10 percent of each paycheck with Chime. This way, when you get paid, you know you’re already saving money without extra work on your part. Boom. Savings just got easier. Your goals just got closer.

6. Protect your hard-earned dough

If you lose your debit card it can be quite scary. After all, your card links straight to your checking account and this is where your money is housed. So, what can you do if you lose your debit card or it gets into the wrong hands?

Instead of waiting in a long line to talk to a customer service rep and answer a million questions, you can use the Chime app and put a halt to your transactions immediately. Simply open your Chime bank account app and block transactions on your debit card. This will prevent any new transactions or withdrawals from your account.

Additionally, Chime has a Zero Liability policy so you won’t be held responsible for any unauthorized charges. In an environment ripe for data breaches and identity theft, being protected is crucial. We take an extra security measure and require two-factor authentication and also have fingerprint authentication.

Final word

Ready to finally learn how to manage your money? A bank account like Chime can help you both manage your money and reach your financial goals.

Life is more than just paying bills and working. With one of the best mobile banking apps on the market, Chime aims to make managing your money simple and even, well, fun. Isn’t it time you lived a less stressful life?

 

The History of Overdraft Fees

Overdraft fees are a wolf in sheep’s clothing. While a bank often markets overdraft protection as a way to help you out when you make an occasional budgeting error, it’s really just an expensive form of credit.

Think about it: in 2014, the Consumer Financial Protection Bureau (CFPB) found that the majority of overdraft fees were charged on transactions of $24 or less. With a median fee of $34 at the time, the same type of charge on a loan for a similar three day period would result in an annual percentage rate (APR) of 17,000%.

How did we get to this point? And what can you do about overdraft fees? Read on to learn more.

A short history of overdraft protection

An overdraft occurs when you’ve written a check, taken a cash withdrawal or used your debit card in an amount that exceeds your available funds. Most banks and credit unions offer overdraft protection, and this covers your shortfall in exchange for a fee.

The first overdraft authorization happened in 1728, according to the Royal Bank of Scotland. An Edinburgh-based merchant named William Hog received permission from his bank to temporarily withdraw more money from his account than he had available. This cash credit, as it was termed, was the forerunner of the modern overdraft. At one point, 18th-century philosopher David Hume called the cash credit idea “one of the most ingenious ideas that has been executed in commerce.”

But, let’s now think about this in terms of modern times. In 2017 alone, consumers paid $34.3 billion in overdraft fees, according to PYMTS.com. So, it’s possible that if Hume knew what would become of the cash credit idea, he may have changed his tune.

The modern overdraft

It’s unclear exactly when banks started charging overdraft fees. But according to Moebs Services, a research firm that focuses on financial institutions, these fees have steadily increased over time.

In 2000, for instance, the median overdraft fee was $20 among banks and $15 at credit unions. In 2017, those fees increased to $30 and $29, respectively. That said, some of the biggest banks in the U.S. charge between $34 and $36. While there are still some institutions that don’t charge fees on overdrafts of less than five dollars, this is not a universal feature. Also, some institutions charge extended overdraft protection, which adds more fees if you don’t bring your balance back to zero within a certain period. These time periods can range from one day to a week.

What you can do to avoid overdraft fees

While overdraft fees are ubiquitous, it’s possible that you’ll never have to deal with them. For starters, you can budget your money in a way that you never overdraw your account. And, if you make a mistake, you can also get your account back in the black before the end of the business day.

There are also three things you can do to boost your chances of never paying an overdraft fee. Take a look:

1. Opt out of overdraft protection

In 2009, the Federal Reserve Board announced a new rule prohibiting financial institutions from charging overdraft fees on ATM and one-time debit card transactions unless the customer opts in for overdraft protection on these transactions. The rule, which was made under Regulation E, went into effect in July 2010.

Yet, according to a 2017 study by The Pew Charitable Trusts, nearly three-quarters of people who overdraft don’t know they have the right to opt out. Guess what? You can opt out! By doing so, any transaction that overdraws your account will simply be declined.

This may not be ideal in some situations. For example, a credit card company may charge you a returned payment fee if a payment doesn’t go through due to an insufficient balance. For other transaction types, however, the only negative impact from a declined payment may be an embarrassment.

2. Get an account with a bank that offers alternatives

Rather than charging a flat fee every time you overdraw your account, some banks offer less punitive forms of overdraft protection. For example, some banks set up automatic withdrawals from a savings account to cover overdrafts.

Let’s say you overdraw your account on a Monday morning and your account is still negative at midnight. Instead of charging you an overdraft fee, the bank will transfer cash from your savings account to cover the negative amount.

Another option is an overdraft line of credit. Again, instead of charging you a flat fee, the bank charges you interest — say 18% — on the negative balance. While this might seem high, if you overdraw $24 and bring your account back to positive within a few days, the accrued interest amounts to pennies.

3. Get an account with a bank that doesn’t charge overdraft fees at all

With the rise of challenger banks, many new institutions have addressed some of the major issues with the traditional banking system, including the problem of overdraft fees.

If you open an account with Chime, for example, you’ll never pay overdraft fees. Period. This means you don’t have to find some other way to avoid the problem because there’s no problem to begin with.

The bottom line

Overdrafts have been around for a long time, but the penalties keep getting worse. The good news is that there are plenty of ways to avoid overdraft fees, and some financial institutions don’t charge them at all.

If you’ve paid an overdraft fee recently, it may be a good time to look into alternatives at your bank or switch banks altogether.

 

What is a Prepaid Card?

If you don’t have an online bank account or credit card and want an easy way to limit overspending, a prepaid card may be your best bet. Millions of Americans are using them to supplement or replace traditional banking services.

Yet, prepaid cards also have their drawbacks.

Here’s the scoop on prepaid debit cards. This way, you’ll be in the know when it comes to making the best choices for your finances and goals.


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What is a prepaid debit card?

A prepaid debit card is exactly what it sounds like. It is an alternative banking card that only lets you spend the money that you have preloaded onto the card. You can use your prepaid card anywhere that accepts its payment network, such as Mastercard or Visa. If you attempt a purchase beyond the funds available, your card is simply declined.

When you’ve exhausted the funds on your card, companies offer you multiple ways to add more money. Depending on the provider, you can add cash via a transfer, direct deposit or cash.

Unlike a traditional debit or credit card, a prepaid card requires that you pay before you go to make a purchase. You do this by loading up your card with cash ahead of time. A debit card, on the other hand, charges you immediately after you make a purchase by deducting that amount from your bank account. And, a credit card doesn’t require you to pay until after you buy something – whenever your next bill is due or over time (you’ll typically incur interest if you don’t pay off your entire balance that month).

Who can benefit from a prepaid card?

Prepaid cards are easy to get and very useful if you’re prone to overspending. You can qualify for a prepaid card regardless of your credit history. And, they are helpful if you’re trying to avoid debt.

Because of these benefits, these cards are often a good option if you don’t have access to a credit card or you’re trying to budget using mainly cash. At the same time, a pin-protected prepaid card is safer than carrying cash. Prepaid cards can also be helpful if you don’t have access to a bank account. With this said, keep in mind that with the rise of challenger banks, more people can now get bank accounts.

What are the disadvantages of prepaid debit cards?

While many turn to prepaid cards for convenience, these cards have some significant limitations. In fact, prepaid cards have a bit of a bad rap and the Consumer Financial Protection Bureau will be rolling out new regulations for prepaid cards in May of 2019.

The most important disadvantage is that prepaid cards charge a lot of fees. For example, you’ll often be charged fees for an initial setup, monthly maintenance, reloading your card, ATM use, and more. Studies have shown average prepaid cardholder fees total $11.00 per month.

If you have bad credit, keep in mind that these cards also won’t help you rebuild your credit. And, you won’t have access to banking services or the ability to stop payments. Also, prepaid cards don’t offer fraud protection like a typical debit or credit card. If your card is stolen, there is no requirement for the issuer to replace the funds. Even with the roll-out of the new CFPB rules next year, prepaid cards that aren’t registered with your name and personal information won’t be required to offer this protection.   Banking options such as Chime provide a great alternative to prepaid cards and allow you to open a bank account with bad credit and require no deposit. 

What are the best alternatives to a prepaid debit card?

If you are turning to a prepaid card because you’re having trouble getting a credit card, want to avoid credit card interest and don’t want to ever pay overdraft fees, you do have other options.

First off, consider an online bank account such as Chime. Chime is a mobile bank account with no hidden fees. You’ll receive a debit card with free access to over 30,000 ATMs. With Chime, you can get paid up to two days early with direct deposit. You’ll also be able to use your card at any merchant where Visa is accepted. With no minimum balance requirements, overdraft fees, or monthly fees, you can get the benefits and protections of a bank without all the costs.

Secondly, if you want to build credit, consider a secured credit card as a stepping stone. These cards help establish or rebuild credit history without living beyond your means. The amount of cash you deposit as collateral becomes your credit limit. For example, if you put $500 on a secured credit card, that’s how much you can spend. It differs from a prepaid card as your charges don’t draw directly on your cash deposit, but on a credit line that you need to pay off regularly.

Bottom line

Whether you’re considering a prepaid card as a budgeting tool or alternative way to bank, be sure to dig into all the fees before choosing a card. And remember: prepaid cards can be expensive to use, so you’ll want to know the costs before committing to a card.

 

5 Debit Card Myths You Need to Stop Believing Now

Your debit card is a pretty simple piece of plastic. Swipe it, chip it, complete your transaction, and build your credit without any fees whatsoever.

Wait a second – not so fast. Like many money myths, it turns out there are some misconceptions about your trusty debit card. And, we’re all guilty of falling for these misnomers from time to time.

So, without further ado, here are some common debit card myths you need to start dispelling right now.

Myth #1: Debit cards are better than credit cards for building your credit score.

Debit cards do not affect your credit score. Repeat: Debit cards do not affect your credit score.

So why does this myth still exist? Maybe it’s because debit cards and credit cards are both plastic and look almost identical? Perhaps because they are often used interchangeably, you think they have the same influence on your FICO digits?

Regardless of why you may think debit cards help your credit score, it’s time to put this myth to bed for good. “(Just because your debit card) has a Visa or MasterCard logo on it, doesn’t mean it is reporting to the bureaus like a credit card would,” says Jennifer Beeston of Guaranteed Rate Mortgage. “Wrong, wrong, wrong.”

Arianna Nunez of website TopCashback.com further explains. “Credit scores are numbers which represent how well you manage a line of credit over your borrowing history. Therefore, to build a credit score, you must borrow money and learn to pay off debt,” says Nunez.

“Debit cards don’t have a line of credit since they automatically release the funds from your checking account,” she says.

In other words, any financial transaction that has to do with borrowing and repaying money – like a loan for a car or home, or spending on your credit card – can either help or harm your credit score. Why? Because this demonstrates how well you handle credit. Your debit card, on the other hand, does not serve the same function and your debit card spending isn’t attached to a creditor. Instead, when you use your debit card, this is akin to spending your own money.

Myth #2: Debit cards don’t offer rewards.

While debit cards may not build credit, you can still earn rewards when you use these handy plastic cards. Debit cards and rewards, you say? That’s right. In some cases, debit card rewards even rival popular credit cards rewards.

“Another myth concerning debit cards and checking accounts, in general, is that neither have offerings which come with reward programs,” says David Bakke of MoneyCrashers.com. “That’s just not true.”

One reason why debit cards aren’t readily associated with rewards is because there aren’t as many reward programs as there are with credit cards. But, says Bakke, a bit of Internet research can lead you in the right direction, to the right card, and to the best rewards.

Myth #3: Debit cards are safer to use than credit cards.

Scams, fraud and identity theft often get lumped into the world of credit cards. While that’s certainly correct, it also tends to go hand-in-hand with the myth that your debit card is somehow safer, a veritable fool-proof fortress to would-be hackers.

Unfortunately, it’s only until after your money’s been stolen that the thought of “maybe my debit card isn’t immune to theft” comes to mind. Advancements in banking security certainly make debit cards safer, but here’s the thing: They actually have fewer consumer protections than your average credit card.

“If a thief steals your debit card info and uses it to buy something, and you wait too long to report it, you could be on the hook for $500 (if you wait between two and 60 days) and the total amount stolen (if you wait more than 60 days),” says Sarah Hollenbeck of Offers.com.

However, under the regulatory Fair Credit Billing Act (FCBA), your liability with a credit card – under the same circumstances – is capped off at $50. This amounts to one-tenth of the responsibility you’d have with a debit card. Why the difference?

“When fraudulent activity occurs on your credit card, no money leaves your bank account, which is not the case with debit card fraud,” says Nunez of TopCashback.com. “Using your debit card has more risks and less protection than most people think.”

Myth #4: Debit cards are free of fees.

Credit cards come with their fair share of fees for late payments, balance transfers, foreign transactions, and cash advances. And let’s not forget about penalty interest, arguably the worst fee of all. To boot, you may also have to pay an annual fee just for having the card in your wallet.

Debit cards, by contrast, get a shining reputation as the card with no fees – mainly because they don’t offer the same services as credit cards. You might want to think again.

While it’s true that debit cards don’t have those fees, they are not fee-free. In fact, your debit card is linked to your checking account, and as such, it’ll carry the same associated fees.

“Most debit cards have basic fees such as overdraft, service, daily balance and ATM fees,” says Nunez.

You can, however, avoid bank fees by being aware of them first and checking the terms and conditions of your checking account. Oftentimes, you can ask your bank to waive fees either temporarily or permanently. If your bank won’t oblige, you can also switch to a fee-free bank account that offers an associated debit card that is – you guessed it – fee-free.

Myth #5: It’s against the law if you don’t have an EMV chip debit card.

Imagine going to the store, and at the point of sale, being asked to insert your chip into the card reader. Your mag-stripe card is the only one that holds a spot in your wallet, so instead, you swipe it, and next thing you know, alarm bells go off, the authorities are summoned, and you’re carted off in the paddywagon. Huh? This hypothetical situation all came about because some folks think they need to use an EMV chip card instead of their mag swipe card.

We left this one last simply because it’s the most ridiculous debit card myth around. The simple myth-busting answer is that merchants don’t care what kind of debit card you have, as long as you can pay them with it. The government doesn’t care either.

At the same time, banks, payment processors and merchants are pushing to migrate from magnetic to EMV cards and this is often why people think they have to have an EMV debit card. To the contrary, if you don’t have a chip card yet, don’t worry. The shift has been slow coming in the U.S. and you can still use your swipe card with zero penalties – or jail time.

Don’t doubt your debit

They say there’s a little bit of truth in every lie, and myths are the same way. They are easy to believe because they often sound true.

But, by understanding the truth about your debit card, you can better manage your money, spend responsibly and learn about some of the features, perks, and quirks that your debit card offers. Lastly, you can give your debit the credit it deserves – without confusing it for credit.

 

Here’s How to Find the Best Debit Card and Savings Account

If you’re looking to open an account with a new bank, you may also be on the hunt for the best debit card and savings account. Yet, with so many different options to choose from, it can be difficult to pick the best one for you.

This is why it’s so important to do your due diligence and understand what’s important to you in a bank account. To help you find the perfect match, here are 6 factors to consider when choosing a new debit card and savings account.


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 1. No Monthly Fees

Did you know that Americans pay $329 in bank fees each year on average? Just imagine what you could do with an extra $329 in your bank account this year.

When you begin searching for a bank account, fees are one of the first things to consider. Many banks will charge monthly service fees that can range anywhere from $2 to $10. Some will even charge you a fee for inactivity. It is possible to avoid many of these charges by setting up direct deposit or by keeping a certain amount in your account. On the other hand: why would you bother with this when you can find a bank with no hidden fees – ever.

Chime doesn’t pass along any hidden bank fees. That’s right. With a Chime bank account, you won’t have monthly minimums, foreign transaction fees, or overdraft charges.

2. Using Your Debit Card to Build Wealth

The easiest way to grow your savings is by making it automatic. With Chime’s Automatic Savings program, each time you use your Chime Visa® debit card to make a purchase or pay a bill, Chime will round up that amount to the nearest dollar. The difference will then be transferred from your Spending account to your Savings account.

Want to boost your savings even further? Set up an automatic transfer each time you get paid. Whether you are saving up for a family vacation, your dream wedding, or something else, Automatic Savings can get you there faster.

3. Liquidity is a Must

Emergencies can pop up at any time. For example, perhaps your car breaks down or your furnace doesn’t work on a cold night. Because you probably don’t keep a large balance in your checking account and other assets might be tied up, it’s important to have a liquid emergency fund. With that said, getting money out of an ATM fee-free or transferring money quickly from savings to checking are also important factors. The bottom line: be prepared for the worst by having a cash cushion available and accessible.

4. Security Matters

It seems like data breaches are becoming more frequent and severe. Some bank accounts, like Chime, take security seriously. The Chime app, for example, supports Apple’s Touch ID iOS security, making it much more difficult for someone else to access your account. In fact, instead of using a passcode to access your savings account, you can set up your account to recognize only your fingerprint.

5. Ability to Deposit Checks On The Go

There was a time when it was nearly impossible to avoid making a trip into a bank branch to accomplish your banking needs. Today, you can hop on an app and do just about everything, including depositing a check with a couple swipes on your smartphone. Luckily, a large percentage of banking institutions now offer this service to their customers.

6. P2P Fund Transfers

When you have a night out with friends it can be difficult to split up the bill. That’s why having a peer-to-peer (P2P) feature with your bank account is important.  Chime, for example, offers its Pay Friends feature. You can simply search for your friends that use Chime, enter the payment amount, and click submit. When the funds are available in their account, they will receive an alert.

Final Word

All of us make financial decisions on a daily basis. One of the biggest decisions comes down to where you choose to park your money. While the features mentioned here are important, you’ll ultimately want to choose a savings and debit card provider that you feel comfortable with. You also likely want to find a bank that will help you grow your savings and reach your money goals faster.

 

This is How Debit Cards and Savings Accounts Can Work Together

How often do you use your debit card? If you’re like most people, the answer is every day.

It’s a quick way to access your money to pay for small purchases like your morning latte, a grocery run, or gas at the pump. A debit card typically draws cash right from your checking account, and paying with this card is like writing a virtual check.

For the most part, debit card transactions are uneven dollar amounts. For example, your coffee may cost $3.69, a tank of gas totals something like $28.44, and groceries may tally up to $35.67. Back in the days of writing checks, many people spent hours balancing checkbooks to make sure all those pennies added up correctly. Now, with all the math done automatically, we often don’t pay attention to those uneven dollar amounts.


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But, here’s a good reason to pay attention to your small change: It can actually help grow your savings account. That’s right. Believe it or not, your debit card transactions can help you save money and beef up your emergency fund. Read on to learn more.

Grow Your Savings Every Time You Spend

There are quite a few bank account programs out there, such as Chime’s Automatic Savings feature, that help you grow your net worth without ever thinking about it. The concept is simple: when you make a purchase with your debit card or pay a bill, the amount is rounded up and that change is moved into your savings account.

Suppose your spending throughout the day looks like this:

  • Morning Latte: $3.69
  • Lunch: $8.25
  • Gas: $28.44

Each transaction made with your Chime Visa debit card would then be rounded up to the nearest dollar. The result would be that you spend $4.00, $9.00, and $29.00 with $0.31, $0.75, and $0.56 going directly into your savings account. That extra $1.62 doesn’t sound like much, but small daily amounts like this can certainly add up over time. After a year, for example, your savings account may have an extra $600 in it.

Are you going to get rich with a program like this? Probably not. But it may mean you don’t have to struggle to figure out how you’re going to pay for those unexpected mechanic expenses. Not only that, but you may sleep more soundly knowing your savings is there to back you up.

Build Wealth by Spending

In order to build wealth, you should have money going into your savings account regularly, and coming out rarely. Unfortunately, most of us lack the discipline to move money into our savings accounts on a regular basis. Instead, we often opt to spend it. With an automatic savings program, however, you can boost your savings without even realizing it.

A round-up program, however, doesn’t take the place of regular and intentional saving. Whereas $600 or so every year is a good start, this may not be enough for you, especially if you’re trying to build an emergency fund that will support you during prolonged and rough times.

For this reason, you should also continue to regularly contribute to your savings. And, to make this easier, you can look for programs that help you get a jump start on building wealth faster. Chime, for example, has a feature that allows you to automatically transfer 10% of each paycheck into your savings account. If you do this – while still counting on your round-up pennies – you’ll be well on your way to meeting your savings goals.

 

What is an EMV Chip Card and How Secure are They?

When was the last time you actually swiped the stripe on your credit or debit card during a transaction? If it’s been a year or so, the timing sounds right.

Over the past 12 months, there’s been a huge technological shift from mag-stripe cards to those enabled with chips. In fact, chip-enabled cards represent more than 600 million cards in the U.S. alone. In spite of retailers in the U.S. being slow to embrace the new technology (in Europe and other parts of the world, retailers have by and large already adopted chip cards), you’ve likely seen merchants upgrading or replacing payment terminals to accept chip cards. While this takes place, magnetic stripes will continue to go the way of the dodo. Even if your old card hasn’t expired yet, your bank has probably already provided you with a chip-based replacement.


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This migration to chips cards, also known in the industry as EMV (Europay, MasterCard, Visa) credit cards, is accompanied by a swirl of hype. For example, EMV providers commonly state that your transactions are more secure, resistant to hackers, and foolproof to fraud. About now you may be wondering: How does that little microchip inside your card provide you with these safety measures?

Read on to learn more about the EMV cards and how you can protect your money.

A primer on card technology

Magnetic stripe technology is actually quite archaic. It dates back about 50 years and utilizes the same analog format as an old cassette tape. It’s literally magnetized and matched to your bank account information. This data, embedded on a simple mag stripe, is consistent and therefore never changes.

So, anytime you go to swipe a stripe-equipped card, it reads the same data over and over again. And this consistent information is vulnerable to fraudulent activity because thieves can decode the magnetic field and duplicate your bank information. In fact, fraudsters commonly use credit card skimmers at ATMs and other locations to glean your personal information. Stopping fraud meant canceling your old card and getting a new one with new information. Unfortunately, your new card included the same stripe technology and it was therefore just as sensitive to theft as it was before.

By contrast, the computer chip on an EMV card is where your banking information is stored, and the chip is always changing up the data on your card. For example, you may have a card number that stays the same, but the information embedded on the chip is constantly being scrambled and encrypted. In short, your card’s chip contains a special microprocessor that creates a code for every transaction, no matter the amount.

So, when you insert your card into a physical payment terminal or when you’re shopping online, the computer chip communicates with the merchant and unscrambles the coded language. Your  payment information is then obtained using one of a few different types of authentication methods:

  • Static Data Authentication (SDA)
  • Dynamic Data Authentication (DDA)
  • Combined DDA with application cryptogram generation (CDA)

The EMV chip also ensures that both the transaction and the cardholder are verifiable (before the days of EMV cards, you’d accomplish this by entering your PIN number and card’s security code).

Essentially, your EMV card contains the exact same information as your old mag stripe card, but because the chip inside is always generating new coded information, it has an extra layer of protection that magnetic stripe technology fails to offer.

For example, if a thief gets his hands on your EMV card, he will have a tough time using it. Not only is it difficult to obtain the computer chip from your card (equipment to do this can cost upwards of $1 million), but the advanced encryption would make it nearly impossible to decipher your banking information. Even if your card number was stolen, and not your actual card, the would-be fraudster wouldn’t be able to use it because EMV chip technology prevents the number from being replicated and repeated. On top of this, a payment terminal won’t recognize the number and the transaction will be declined.

Follow these EMV chip safety tips

Although EMV technology makes banking more secure, identity thieves have become more sophisticated and will always try to find ways to access your money. Your Chime debit card, for instance, is chip-enabled, but you should still take precautions to protect your finances, pay safely and avoid getting scammed. Take a look at some ways to keep your money safe:

  • Guard your digits: At an ATM, the supermarket, the mall, or when using your laptop in a public space, never divulge your card or PIN numbers to anyone. Fraud can still occur, so if possible, opt to sign for a transaction instead of using your PIN. If a fake transaction occurs, the liability falls back on the issuing bank, or on the merchant if the business is not equipped to handle EMV transactions. Some cards have even done away with PIN numbers and employ a chip plus signature method. (Neither Chime or another bank will ever ask you to reveal your PIN number.)
  • Keep track of your bank statements: Banks are more vigilant today to stopping theft and may even intercept fraudulent activity before it happens. My bank, for example, recently notified me that there was an attempted unauthorized use of my debit card – before a transaction was made. But, thanks to my EMV card, the fraudster couldn’t use my card number, and the bank recognized that I wasn’t the one using the card. The moral here: Stay on top of your monthly bank statements and look for transactions, debits or withdrawals that don’t look familiar. If you spot anything suspicious, report it to your financial institution.
  • Opt for mobile payments: Chime’s spending and automatic savings accounts are just two ways to maximize your mobile banking experience without the need to use a physical debit card. To ensure your safety, you can also look for retailers and vendors with mobile payment technology as this lowers the risk of your information being captured. Adding your debit and credit cards to your phone and using mobile-enabled terminals can also help ensure a secure shopping experience.

Banking Services provided by The Bancorp Bank, Member FDIC. The Chime Visa® Debit Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. Chime and The Bancorp Bank, neither endorse nor guarantee any of the information, recommendations, optional programs, products, or services advertised, offered by, or made available through the external website ("Products and Services") and disclaim any liability for any failure of the Products and Services.