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.

 

It’s Time to Debunk These Generation-Specific Money Myths

If you’re a Millennial, you’ve probably heard this financial myth more times than you can count: “You don’t need to start saving for retirement until you’re 40.”

You’ve probably also heard that you don’t need life insurance, along with a slew of other money myths. Sometimes these financial misconceptions are passed down from your parents. Other times, they are perpetuated by social media, what you see on TV, or just plain old word of mouth.

Every generation has its own share of money myths. Regardless of whether you’re a Baby Boomer or a Millennial, you’re probably out of touch with your finances in some way or another. So, how can you discern fact from fiction?

That’s where we come in. We’re here to help you sort through some common generational money myths. By doing so, we’ll hopefully help you make more informed financial decisions – without being swayed by false information. Take a look.

Baby Boomers

Myth: They’re not up to speed with Fintech.

Baby Boomers, the generation born between 1946 and 1964, are typically 53 to 71 years old. The first smartphone came out around 2007, when the youngest members of this generation were 43 years old. Because boomers did not grow up with modern technology, they’ve carried around this technologically out-of-touch reputation for quite some time now.

It’s partly true. For instance, maybe your mom or dad has never downloaded a budgeting app before, or your uncle doesn’t even know what an app is. You certainly can’t blame your grandparents for not trusting Internet banking or emerging financial technologies. It’s not how they grew up.

“Baby Boomers aren’t known to be the most tech-savvy age group, in a financial or broader sense,” says Jennifer McDermott, a consumer advocate for personal finance website finder.com.

But, here’s the kicker: Boomers sometimes do embrace Fintech, and this is why you can’t lump all Baby Boomers into one category. According to a survey by finder.com, 17 percent utilize mobile payment services like Venmo and Google Wallet. According to McDermott, this shows that this older generation is embracing new money tech tools.

So, if you (or your parents) are Baby Boomers and still trepidatious about using your phones or mobile devices for banking, don’t feel compelled to go overboard and start using multiple new apps all at once. For budgeting, for instance, you can try something simple, like Mint.  And, if you’re new to online banking, look no further than an intuitive, smart option like a Chime account.

Generation X

Myth: They’re the most financially responsible generation.

Generation Xers, born between 1961 and 1981, are precariously sandwiched between Boomers and Millennials – the awkward middle child with the uncertain financial identity. Boomers reaped financial benefits from the fiscally prosperous era following World War II, and Millennials aren’t old enough to contend with money challenges like looming retirement and raising a family while caring for aging parents.

For this reason, Gen X is often called the “sandwich generation.” And this sandwich generation, which often balances multiple responsibilities at once, is also often considered the most financially responsible generation.

“Given they didn’t reap the economic benefits of the Baby Boomer generation, yet have more responsibilities than their Millennial counterparts, Generation X is usually seen as being the most careful with their savings and spendings,” says McDermott of finder.com.

But, upon digging a little deeper, we found that this isn’t always the case. Other generations can be just as fiscally responsible and often don’t have nearly as much financial stress or debt as Generation X.

A recent survey by credit bureau Experian revealed that the average Gen Xer has more than $125,000 in cumulative debt – from student loans, mortgages, auto loans, credit cards, and more. This has left about 39 percent  of Gen Xers stressed out and pessimistic about their financial future, according to another financial survey by TD Ameritrade.

Before you get even more worried about your financial outlook, keep in mind that you can make changes – starting right now. Here are steps for Gen Xers to take:

  • Meet with a financial advisor to rethink your retirement plan
  • Readjust your tax withholdings through your employer
  • Build a new budget with a renewed focus
  • Start an automatic savings account that compels you to save

Millennials

As the youngest crop of adults – born between the early 1980s and the early 2000s – Millennials are the first generation to grow up with the Internet, smartphones, and online banking. Because there are so many generation-specific financial myths for Millennials, it was hard to choose just one myth. So we decided upon two.

Myth #1: They’re lazy, entitled and don’t care about work.

Millennials, also known as Gen Y, get the worst reputation where money is concerned.

“One of the biggest money myths about millennials is that we’re all wasting our income on avocado toast and the latest iPhone,” says Yasmin Purnell of money blog The Wallet Moth.

But that’s not entirely true. Millennials often struggle financially and, as a result, they have learned to save money rather than blow it on frivolous things.

“Millennials have grown up in some of the toughest financial conditions there has been in decades. They are having to make a living on a much lower income,” says Purnell.

In fact, Millennials struggle with crippling levels of student loan debt and this is nothing short of a financial epidemic. In 2017, for example, the average recent college graduate has over $37,000 in total debt – more than most entry-level jobs pay in one year. All told, we’re faced with a $1.45 trillion student loan problem, which rivals the country’s national deficit. Couple this with the fact that Millennials often work side hustles to diversify their income streams or start companies, and you can put this myth to rest.

“Not only are the younger generation holding down jobs, they are also the most likely to have a second job, or side hustle, to supplement their income,” says McDermott.

In finder.com’s survey, one-third of millennials (33.3%) earn money on the side, ahead of Generation X at 26% and Baby Boomers at 16.6%.

Myth #2: They don’t think about the long-term.

“Live for today and spend like there’s no tomorrow” sounds like a Millennial manifesto you’ll find on some Instagram or Facebook meme. Let’s continue with this theme: Gen Y is impulsive and short-sighted, they don’t care about anything past their immediate goals.

Although there are certainly those who fit these stereotypes, Gen Yers are more financially conscious, and better with their money than Baby Boomers and Generation Xers, according to a study by Charles Schwab. The study pointed out:

  • 34 percent of Millennials are more likely to have a financial plan than older generations
  • 57 percent are more financially engaged, and actively involved in their portfolios
  • 84 percent are more aware of their brokerage account fees

The study also found that older Millennials – those now in their 30s – are more likely to have a budget and an optimistic attitude towards money than those in their 20s.

 

Financial Advisor Reveals Top 8 Money Myths (So You Can Avoid Them!)

 When it comes to figuring out your finances, it’s easy to get led astray. There are so many pervasive myths about money, debt, investing and more. How should you even begin?

Darla Pellersels, a long time financial advisor and president of Prosperity Financial Associates in Henderson, Nevada, says it’s important to educate yourself about finances and start taking control of your money right now.

“I would encourage everyone to read, reach out to an investment professional, take a class, and gather facts on investing, finances, budgeting, life insurance, and debt reductions strategies,” says Pellersels.

To help you manage your money, Pellersels debunks 8 common money myths that you may find yourself believing. Take a look.

MYTH #1: My student loan is deferred and not gaining interest.

Oftentimes this isn’t true. Check out the conditions of your loan and read every bit of paperwork. In many cases, the specifics of your loan are stated quite clearly on the invoice or statement.

MYTH #2: I don’t need life insurance because I will be dead, so why should I care?

This is a common myth that many people buy into. Although you may not need the insurance money after you pass away, a lack of insurance can leave your grieving spouse in a terrible financial bind. And, in some states, your loved ones can inherit your debt – leaving them in dire financial straits. You have insurance on your cell phone…why not your life! There are some insurance products that can also pay you for chronic, critical and even terminal illnesses. It’s worth your time to research and buy the best life insurance policy for you.

MYTH #3: You have to be rich to invest.

This is flat-out, not true. In fact, you don’t even have to be wealthy to hire a financial advisor. There are plenty of advisers out there that will help you invest with a small minimal investment and low to no fees. Pellersels says she has many clients that can only invest a small amount monthly or annually. If you start early, a small amount can change your retirement picture down the road.

MYTH #4: If a financial advisor controls my money, I don’t need to know how to invest. That’s why there are professionals.

Here’s the bottom line: it’s your money and your retirement! You need to know where your money is invested at all times. You should always ask about your investments, especially when weighing risk against benefits and volatility.

MYTH #5: I have to wait until I am 65 to retire.

Many folks believe that there’s a mandatory retirement age but this just isn’t true. You can retire at any age or time you want. Regardless of when you plan to retire, it’s important that you work toward getting out of debt, invest as much as you can into a retirement account, and save money to prepare to live out the rest of your years.

MYTH #6: It’s too late for me to gain control of my finances. I’m in my 50’s or 60’s.

If you are still breathing and working, you can get started! You can pay off your recurring monthly debt, save up for emergencies, and sock money away for retirement. With dedication, a strong monthly budget, and a will to make it happen, you’ll hopefully be able to plan for a comfortable retirement.

MYTH #7: I will always have a car payment or house payment.

Believe it or not, there is nothing that says these things are forever. You don’t have to have a car payment or house payment. There are many people out there that pay cash for slightly used cars. There are even people that have paid off their home mortgage early. To pay off your car or home loan sooner, you may want to consider earmarking extra money toward your monthly payments. This will not only help you hit your goals earlier, but you’ll also end up paying less interest.

MYTH #8: Credit Cards are great for emergencies.

Wrong. Cash is great for emergencies! If you use a credit card to cover an emergency and it lasts longer than anticipated, you have only dug yourself into a deeper debt hole. Losing a job, medical issues or even accidents can set you back significantly. This is what an emergency fund is for.

Seek Out Expert Advice to Discern Fact From Fiction

Speaking with a good financial advisor can help set you up for financial success. The key is to find someone who is ready and willing to answer all your questions in a way that helps you understand and take control of your money. Are you ready to bust some money myths?

 

5 Money Myths That Can Harm You Financially

You may have heard that sticking to good financial rules of thumb can help you achieve financial security. But, you may also want to be aware of money myths that can have major negative implications.

To help you stay informed and make smart money moves, you may want to read up on these 5 money myths.

1. Checking your credit hurts your credit score

With credit reports, there are two types of inquiries: a hard inquiry and a soft inquiry. A hard inquiry happens when a lender checks your credit report — at your request — to make a lending decision. Hard inquiries can knock a few points off your credit score and stay on your credit report for two years.

A soft inquiry happens when a company or person checks your credit report to pre-qualify you for a loan or credit card or perform a background check. It also happens when you check your credit score. Soft inquiries don’t affect your credit score in any way.

If you believe this myth and don’t check your credit score often, potential errors or fraud could go undetected long enough that it would be hard to clear up quickly. And, a ruined credit report can also make it hard to get approved for credit when you need it.

2. A home is a good investment

There’s no guarantee that your home will appreciate in value at a reasonable rate. We only need to look to the Great Recession to see how quickly home prices can plummet.

Even some homeowners who could afford their monthly payment were “underwater” as the value of their home descended below their loan balance.

There are also extra costs involved with owning a home that should be considered in calculating your return. For example, homeowners insurance, private mortgage insurance, and property taxes are all mainstays with many mortgages. Maintenance and unexpected repairs can also get pricey.

That’s not to say a home can’t be a good investment for someone who is willing to take on the risks. But, it’s important that you don’t make such a long-term financial commitment thinking you’ll automatically make money – especially if the housing market suffers another crash.

3. All debt is bad

Focusing all your efforts on paying off debt can leave you without adequate emergency fund and retirement savings. When creating a plan to tackle your debt, keep all of your financial goals in mind.

Mathematically, low-interest debt can be good if you’re using it as leverage to work toward your other goals. For example, say you have $10,000 left on your auto loan with a 2.49% interest rate. You can put an extra $200 a month toward the debt, or you can put that money into your retirement account, where you could realistically get a 5% to 7% return over the years.

4. Carrying a balance on your credit card boosts your credit score

If you’re paying off your credit card every month, that means there’s no balance to report to the credit bureaus, right? Not necessarily. Credit card companies typically report your card balance to the credit bureaus once a month, and the reporting date is rarely the same as the due date.

So, unless you don’t use your card at all, it’s likely that the company will always report a balance. What’s more, credit card companies don’t report whether or not you’ve paid in full, just whether you’ve paid on time.

As a result, carrying a balance doesn’t have any effect on your credit at all. Instead, it could lead you to paying interest unnecessarily for years – and that’s money that you could use for other things.

5. Buy high, sell low

It’s a common emotional response to buy into the stock market when things are going well and to sell as the market tanks. The problem with this is that you’re losing money by buying your stocks at a premium and selling them at a discount.

Instead, think of stocks as groceries. Focus on what can provide you the most value for your money and avoid overpriced items until they go on sale.

If you invest in mutual funds, use the dollar-cost averaging method, investing a fixed amount every month regardless of how the market is doing. This strategy can mitigate the risks that come with a volatile market.

Don’t believe everything you hear

Not every money tip you hear is in your best interest, no matter how good it sounds. If something sounds even a little off, spend time researching it to make sure it holds water. This is especially important when it comes to debt and investing, as these often involve a lot of money over time.

The more you know, the more control you’ll have over where your money goes. This, in turn, makes it easier to reach your financial goals.