8 Reasons Credit Cards Are Better Than Debit Cards


Based on a recent article from the National Retail Federation, consumers will be relying less on credit cards this holiday season. In fact, it’ll be the lowest since 2002. People are making this decision because they want to actively budget they’re spending on gifts. I believe this a strategy that works well, but if you can control your spending WHILE using your credit card, then you’re getting the best of both worlds.

In light of the holiday season, I’ll give you my Top 8 reasons of why using a Credit Card is better than a Debit Card:

  1. Credit cards provide better security. If you have any charge disputes on your debit card because your card got stolen, then the bank will not release your money until it has been cleared. That means you can be out of hundreds or thousands of dollars, when it wasn’t even your fault.
  2. Accumulate Reward Points. More credit cards than debit cards allow you to accumulate points towards reward items (e.g. travel, electronics, even cash)
  3. Build your credit. As always, building a good credit history is extremely important and only a very few debit cards can do this.
  4. Warranty coverage. Surprisingly, most credit cards offer a special warranty on items you purchase with it. Perfect for when your gift is broken within a year. I was surprised to find out how many of my own cards offered this benefit. You should call up your credit card company and see if you’re covered as well.
  5. Stress-Free Authorization Holds. You’ll notice when you check into a hotel, they typically have signs telling you that they will place a temporary charge on your debit card. This charge is used to protect the hotel from delinquent guests, which is fair. However, this charge will remain on hold for days after you’ve checked out. This means you’re have less cash on hand.
  6. Cheaper to rent a car. Perhaps you’re visiting family outside your hometown and need to rent a car. If you try to rent with a debit card, they will require that you use pay the daily insurance coverage.
  7. Price Protection. Another surprise is that some credit cards also offer price protection on the items you purchase. This means if you purchased a product and the price drops within a certain time period (usually 30 days), the credit card company will match the new price.
  8. Various Additional Perks. Roadside assistance, lost luggage coverage, are just to name a couple and when the snow falls or you have a valuable gift in your luggage, these will come in very handy.

You may wonder why I left out “overdraft fees”. This was a major advantage of credit cards over debit cards. However, with the new federal law passed in July 2010, it prevents banks from charging you an overdraft fee and simply decline purchases if you don’t have enough. You can get around this by providing your bank the permission to withdraw from another account, but my personal opinion is to not opt-in and simply let charges get declined.

Another great perk of a credit card versus a debit card, is that if you get a 0% APR or low interest credit card, it’s essentially free money.


How to Activate Chase Quick Deposit for iPhone

As a follow up to my article, “Chase Quick Deposit on their iPhone App“, I wanted to walk people through the steps on how to activate your Chase Quick Deposit feature. Here are the seven (7) easy steps:

  1. On your iPhone, open the Chase app.
  2. Press the “Deposits” button.
  3. A welcome screen appears.
  4. Press the “Sign Up Now” button.
  5. A Service Activation notice will appear.
  6. If you agree to the terms then press “Yes, I agree“.
  7. Lastly, a message will appear stating you have successfully enrolled.

Visual Walk Through of the Chase Quick Deposit activation:


Don’t Be Lazy When It Comes to Money: Use A Manual Ledger

If you’re like me, you find it really convenient that your credit card or banking institution provides you with a list of your most recent transactions when you log into your online account. It really simplifies the book keeping process and that’s great. Unfortunately, with simplicity comes laziness and with laziness comes mistakes/unwelcomed surprises. I have to admit, I have fallen victim to this.

This past month, I have been going out more often with friends for birthdays, dinners, movies, etc. This leads to me placing charges to to my credit card. I usually check my balance once a week to make everything is in order, but with multiple things going on and again, laziness, I skipped a few weeks. To my unwelcomed surprise, I spent a lot more than I have in a long while. Luckily, I can handle it, but it blew out my budget for the month.

What could I have done to avoid this? Well, I guess I could have checked my online balance more often, but not all transactions appear immediately. And even if they do, they typically don’t include the additional tip you’ve added to the bill. Going out to eat numerous times can really cause your total debt to be offset by a lot. My solution is to keep a simple ledger going forward. It doesn’t have to be anything fancy whatsoever, just follow these three easy steps:

  1. Create a new spreadsheet
  2. Create four (4) columns: Transaction Date, Vendor, Card, and Amount:
    • Transaction Date – the date you made the purchase or deposited money
    • Vendor – the place you made your purchase or return
    • Card – in case you have multiple cards, you can keep track of which one your spending with
    • Amount – the cost of the transaction
  3. Enter all your transactions each night through the receipts you collect

This is a tactic I used to curb my spending after college as well. It worked wonders because it gave me a real time tally of how much I was spending and how much I truly had left in my accounts. It’s also the idea of associating your purchase with additional labor and helps with memorization. What does it help you remember? THAT YOU KEEP SPENDING MONEY THAT SHOULD BE SAVED!


Chase Quick Deposit on their iPhone App

Follow this link to find detailed steps on How to Activate Chase Quick Deposit for iPhone.

After my iPhone App updates are completed, I like to go into each newly updated app and figure out how they were “improved”. From my earlier experiences, it usually just turns out the apps now contained more advertising.

However, when I opened up the new Chase iPhone App, I noticed a new icon on the bottom navigation marked as “Deposits”. Initially I thought, what a useless add-on. What? It’s going to tell me what my recent deposits were? I mean, sure, I guess some people would find it useful. So I just pressed the new icon and was blown away.

This wasn’t a feature that tells you what your most recent deposits were, it’s a feature that actually allows you TO MAKE DEPOSITS! I was completely blown away. Is this for real? I haven’t used it myself yet, but it seems like you simply need to take a photo of the front and back (ensure you sign it too) of the check(s) you’re depositing (up to a total of $1000 per day or $3,000 a week), press a couple of buttons, and you’re all set. I believe I have a $50 check laying around here somewhere and I’ll follow up with how smoothly or rough everything goes.

On another note, the Chase iPhone App has also activated a new feature called Person-to-Person QuickPay. Once you activate this feature through a regular computer, you can then have the option of sending/request payments to/from anyone by simply entering their E-mail address. Similar to how PayPal does it’s payments. That’s pretty awesome.

I’m amazed by the innovation that Chase has brought into the playing field of financial services and I’m sure it’s hard for people not to be impressed. Understandably, there are concerns of authenticity and validation of each check being deposited, but I’m sure Chase will address those security concerns.

Update (2010-07-05) Just completed my first Chase Quick Deposit and everything went pretty smoothly, even while using EDGE. I personally chose to retake the photos a couple of times, just to make sure my first deposit goes well. If any hiccups occur, I’ll be sure to update this post.


How Credit Card Interest is Calculated

There is no simple way to calculate interest on credit cards. There are different values that come into play:

  • Outstanding balance from the month before
  • Annual Percentage Rate of your credit card
  • Number of days in a month your credit card is calculated over
  • Number of days in a year your credit card is calculated over
  • Your Monthly Payment amount

For the calculations below, I’m just going to take a snapshot in time, so that it doesn’t take into account your monthly payments and compound interest. Essentially, I’m trying to give you a simpler view so that it’ll be easier to digest how much money you will be burning on interest on a daily, monthly, and annual basis.

The below examples will use the following values:

  • Annual Percentage Rate = 10%
  • Outstanding Balance = $5000
  • Days per Month = 30
  • Days per Year = 365

Formula to calculate daily credit card interest accrued:

  • ((Annual Percentage Rate/100)/Days per Year) * Outstanding Balance = Daily Interest
  • Example: ((10/100)/365) * 5000 = $1.37

Formula to calculate monthly credit card interest accrued:

  • ((Annual Percentage Rate/100)/Days per Year) * Outstanding Balance * Days per Month= Monthly Interest
  • Example: ((10/100)/365) * 5000 * 30 = $41.10

Formula to calculate annual credit card interest accrued:

  • Outstanding Balance * (Annual Percentage Rate/100) = Annual Interest
  • Example: 5000 * (10/100) = $500.00

What Are The Benefits to Calculating Your Daily Interest Rate?

After I created the “Calculate Your Daily, Monthly, and Annual Credit Card Interest” page, I was asked numerous times, why did you specifically decide to create that tool and what purpose does it serve? Well, I guess my brief intro on the homepage was a bit too brief. Let me elaborate.

Around the time I created that automated form, I was actually trying to make the decision of whether or not it’d be worth my effort to transfer my credit card debt into another credit card. I had multiple 0% balance transfer offers on existing cards, but knew better than to think it was a no-brainer decision, since there’s always a transfer fee associated with them.

The first step I took was to calculate how much interest I was losing per month. The idea was that the one time balance transfer fee may equate to be about three months worth of interest, in which case I could potentially pay off within two months. If that were the situation, then I would be wasting time calling up their customer service to perform the transfer. Not to mention, it’s just a dumb decision to pay more in the long run.

Once I got the formula to calculate the monthly interest rate and determined it was a good idea to perform the transfer, it dawned on me that it’d be extremely interesting to figure out how much I was “spending” by carrying this balance for so long. Of course my balance fluctuated throughout the months and years, but I just had to simplify my decision making process by fixing the balance to the amount at the time. What I discovered was pretty eye opening the moment I saw it.

I believe my daily interest came out to be about $1.25, that like one item from the McDonald’s Dollar Menu (plus tax). But, I haven’t been eating at McDonald’s and a side salad sounded pretty good at the time. Then, I thought, what if I escalated the calculation to a week? It came out to be $8.75. That equated to about 3 gallons of gas for my car. And what the heck? I’m always filling up my tank. That extra money would come in really handy!

Essentially, it put the money I was spending on credit card interest into perspective. Seemingly small amounts really add up and I couldn’t believe it. At that point, I made it a goal of mine to erase my credit card debt as soon as possible. So, my purpose of the form is mainly to provide people, in a similar situation that I was in, some perspective. It’s extremely important to manage your money (especially for kids) and figure do what you can to lower/extinguish your credit card debt.

I truly hope some people out there who have used my form realized the same lesson I did. For those who are severe bad credit situations, I recommend determining and monitoring your credit score first to determine how deep you’re in it and then just work your way up.


How To Build Credit With The Public Savings Bank Secured Visa

I was provided the following article for the Public Savings Bank Secured Visa. In a nutshell, this card allows you to create good credit history while removing the risk of missing a payment, which in turn will improve your credit history. Here are the simple steps they provide on their site:

  1. You deposit a minimum of $300 into a Public Savings Bank FDIC insured deposit account.
  2. You can then make purchases with your card up to the amount you have in your security deposit account.
  3. You must pay at least the minimum payment before the due date each month. Your security deposit does not cover minimum payments.
  4. Your payments are reported to all 3 major credit bureaus (TransUnion, Experian, Equifax) so you can begin to establish your credit immediately.

For people with no credit or those who have experienced a negative credit event, such as divorce or foreclosure, establishing credit history can be difficult. Without proper credit, everything from a car loan to an apartment or even a job can be denied.

Prepaid cards are one way to manage daily expenses. However, prepaid cards simply provide access to your own money, not credit from a lender. Prepaid cards do not report to credit bureaus and do not help re-establish credit history. Individuals need to demonstrate on-time monthly payments on a credit card in order to rebuild credit history that’s so important.

How can someone who is denied a credit card rebuild their credit?

Well, one option is the Public Savings Bank Secured Visa. It offers people with low credit or no credit the ability to re-establish their credit history and work towards improving their credit score. Individuals deposit money into an FDIC-insured account that acts as a security deposit. They can then make purchases anywhere Visa is accepted or take cash advances up to the deposited credit line amount, currently between $300-$2000. Payments are reported to all three major credit bureaus (TransUnion, Experian and Equifax) so customers can begin to establish credit immediately.

The Public Savings Bank Secured Visa does not require a credit check or even a checking account to apply. Customers can fund their account via Western Union, ACH, wire transfer, check or money order. The card has no annual or monthly fees, and offers 0% APR for 6 months. Rush shipping is available so customers can begin using their card just days after funding their account.

Building good credit is critical at a time when credit is getting harder to obtain. This card allows the customer to build good credit while enjoying all the benefits of a Visa card at very favorable terms.

You can apply for the Public Savings Vank Secured Visa at www.publicbankcard.com and be approved within only a few hours.


Jobs, Ledgers, and Teenagers (Teaching Kids About Money)

This article is part of a series on Teaching Kids About Money.

My next suggestion in how to teach kids about money may seem a bit far fetched, but I’m pretty sure it’ll work. Tell them to get a job! Of course, I’m talking teenagers. However, there are options for pre-teens to start making their own income as well, which I will cover later. The best way to teach your kids the value of a dollar is to make them earn it themselves. No longer will they take your busy day for granted. If you cut them off from any additional income and they know the only way to survive is on their own, I’m sure they’ll learn to adapt quickly. It won’t be easy and it could get quite dirty, but it’ll work.

I believe it’s a misconception that all teenagers are lazy and would rather spend their summer playing rather than finding a job. Though there are a lot of kids out there that do prefer to let mommy and daddy pay for everything, there are also a good amount of teenagers out there who simply want their freedom and not have to rely on parental figures to supply them with money to have some fun.

Of course, having fun is great and a necessity (especially while younger), but you must keep insight the purpose of this exercise – teaching your kids about money management. Make sure they open up a savings/checking account. The great thing about banks nowadays is that you can check your balance online. There is a slight defect though, the transactions tend to have a day or two lag before it’s realized within their systems. So I recommend convincing your kid to manage their money within their checkbook or hard copy ledger. Make sure they set aside time (about 10 minutes) a day updating their debits and credits. This way, they’ll learn a good habit that helps ensure they won’t overspend.

Once a child learns how hard it is to make money and manage it, this will teach them to cherish and save their hard earned money. At the very least, if they’re still spending their money frivolously, you can at least have a sigh of relief that they won’t be depleting your money.


Donations and Kids (Teaching Kids About Money)

This article is part of a series on Teaching Kids About Money.

Let’s be honest, most people don’t donate as often as they should. I’m guilty of it myself. But donating to good causes does play in the realm of being financially responsible as a society. And this is something that needs to be introduced to our younger generation at an early age as well. Teaching kids to donate part of their money isn’t only helpful for society, but it’s also very beneficial for them.

  • Sharing is caring. I would hope that a majority of the people out there want to make sure their children grow up caring about others. It is suggested that ten percent (10%) of your revenue should be set aside for donations to charities. What does this teach your kid about money? Well, simply that a majority (if not all) of the time there will be people less fortunate than themselves and they should help whenever possible. From a value of money perspective, it helps strengthen their idea how important money is in society.
  • Power in numbers. It’s true that a single dollar won’t exactly feed an entire nation alone. It’s really the idea that we, as a society, can help others. This then teaches our younger generation that when multiple people come together to help others, then making a positive difference can be achieved.
  • Introduction to tax deductions. Taxes are inevitable, and too many Americans are still left in a dumbfounded state when this topic is brought up, which we need to hedge. One way to hedge that is to introduce how donations are tax deductible. It’s a bit of hard concept to understand, especially for a child. How does giving money give me money back? It’s a bit counter intuitive, but it can be a good introduction to a kind of investment as well. Please note that this may be something you’ll want to teach them only after you teach them how to save and instill the value of money to them.

I know this particular article is only loosely related to the idea of teaching kids about money, but I really felt it was something that needs addressing. Being financially responsible doesn’t simply mean saving for ourselves, but doing what we can to help others whenever possible.

What percentage of your revenue do you think you donate?


Savings/Checking Accounts for Children (Teaching Kids About Money)

This article is part of a series on Teaching Kids About Money.

I believe many children either don’t have a savings/checking account or they aren’t aware they have one available to them. My own parents were very conscious of making sure they were saving money for my future. It’s taken nearly 30 years for me to finally realize how lucky I was that they were able to do that for me, but I digress. Though my parents were actively saving for me, taking the money given to me as gifts and depositing it into my college fund, I actually had no transparency to where that money was actually going. So, at that point, all I knew was that my parents took my money, placed it somewhere, and I wasn’t going to see my money for a long time. I didn’t understand what the benefits of opening a savings/checking account were. And this a key point to helping teach kids about money management.

What can a child learn from having their own savings account? Plenty. Here’s to name a few:

  • The process of opening an account in person. Nowadays, we have abstracted the need to go to a physical bank in person to open an account and do everything electronically. If your child is younger than 16, and your bank has a physical office, I would recommend taking them to open up an account. Why? Though the information of the various savings accounts are available online, it’s always best to have a person walk you through every nook and cranny. This also gives your child an opportunity to exercise their social development skills and learn to ask the experts the right questions.
  • The power of compound interest. Similar to what I mentioned in, Prepaid Credit Cards and Kids, teaching your child about compound interest will help them understand what their money can do for them if they focused on saving and not spending. But difference between what I mentioned in Prepaid Credit Card and Kids, it will be coming from the bank’s pocket – not yours. Though nowadays, the interest rates are fairly low for savings/checking accounts.
  • Learning the pains of withdrawal. Savings/checking accounts may not provide the best return in terms of interest rates, but it does provide the best flexibility when it comes to access to your money. And though we would all probably prefer to have children learn about depositing money, they’ll eventually want to withdrawal their money as well. With every withdrawal they’ll learn to live within their means, which is a huge lesson for any person to learn at any age.
  • Reviewing the bank statement. It’s not like reading the financial section of the Wall Street Journal, but it’s a start. You can teach your kids about the different vocabulary used within the statements, but more importantly, you can teach them how organized the data is. The sooner they learn to keep their finances in order, they closer they are at being financially responsible.

If you’ve already opened up a savings account for your child, which one did you open and why?


Prepaid Credit Cards and Kids (Teaching Kids About Money)

This article is part of a series on Teaching Kids About Money.

Credit cards have a bad reputation. People view credit cards as an evil doorway to the downward spiral of debt. The truth is, we should all have credit cards. Sure they’re capable of ruining our credit, but ultimately their purpose is to help our credit. The evils of credit cards really falls upon the cardholder and miseducation. One way we can introduce children to using credit cards responsibly is by providing them with Prepaid Credit Cards, where the amount you place in the card is up to you.

Prepaid credit cards don’t necessarily help your credit, though there are ways (e.g. AccountNow Prepaid Visa or MasterCard, The Public Savings Bank Secured Visa, etc.), it’s mainly a great tool to help teach kids how to use credit cards responsibly.

Here are some suggestions on how to teach kids about money management with Prepard Credit Cards (with the help from Little Eddie):

  • When you give the prepaid credit card to Little Eddie, make sure you present him with a specified amount of time the amount of the card should last. For example, you can place $50 on the card and tell Little Eddie you won’t re-fill it for three months.
  • Along with the tip above, you can even add an incentive for Little Eddie to not spend a percentage of his money within the alotted timeframe. So, if you chose to make the percentage 50%, and Little Eddie only spent $25 of his prepaid credit card after three months, then your next refill won’t be $50, but $51 instead. And if Little Eddie is able to stay within his 50% limit, then you’ll re-fill his card with $52 instead. This will teach Little Eddie the benefits of compound interest.
  • On the contrary to the above tip, if Little Eddie uses up all his funds within a month (with no good reason), then you can reduce the amount you’re going to provide him during the next re-fill period. This will teach him to be more money conscious.
  • You should also make it Little Eddie’s responsibility to approach you to get the re-fill. Providing him with a grace period of one week or ten days to do so. If he doesn’t approach you within the grace period, you can again deduct $1 from their re-fill amount. This will teach Little Eddie to be more responsible with time and simulates the idea of credit card late fees.

Do you have any additional ideas on leveraging Prepaid Credit Cards to help teach kids about money management?

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Teaching Kids About Money

I was watching CNN recently and one of the topics for discussion was related to how an elementary school in Chicago, Ariel Elementary Community Academy, has integrated money management for kids into their curriculum. The moment I heard about this, I was immediately captivated. I have been meaning to write about this topic for quite some time now, but just never got around to it. So, thanks to CNN, I have become re-inspired.

Ever since I read the book, Rich Dad, Poor Dad, I have always felt that we don’t do enough to teach kids about money. There are so many adults who could have benefited from this type of education, if only they were introduced to it at an early age. I must admit, not even I was taught anything about managing money as a child. When I got a hold of money, I would immediately spend it on candy and toys. I think back and wonder what I could do with the money I squandered. Think for a minute about how much you could have now, if you just saved 10% of all the money ever given to you.

Well, no reason to dwell on the past any longer! The best we can do is to make sure the children we influence learn from our mistakes. In the coming weeks, I will have a series of articles on how we can teach kids about money management.

How many of you out there wished you were better educated on money management at an early age?