If you’re wondering how to budget with a debit card, you’ve come to the right place. Budgeting has come from a dreaded weekly task to an easy tap on an app.
In Debt.com’s recent survey of the population’s budget trends, roughly 30 percent of individuals simply open their bank app on their phone to do their budgeting, saving them time, frustration, and money.
Let’s see just how easy it is to budget with a debit card.
What is a Debit Card?
A debit card is a method of payment in the form of a plastic card that is linked directly to your checking account.
You typically have a unique PIN to use your card at retailers in order for the funds to be released.
Steps to Budgeting With a Debit Card
Budgeting steps are easy and straightforward, like an elementary math equation. Here’s a refresher on simple budgeting:
- Tally up your total income from all sources.
- Add up your total expenses for an established amount of time.
- Subtract your expenses from your income for the same established amount of time.
- Make a plan of action based on your resulting numbers for either savings goals or income increases.
Budgeting with a debit card is no different in the process than it is with other methods. You just need much more discipline to make it work well.
In fact, debit card budgeting takes more discipline than most budgeting methods.
There are three main components to making this type of budgeting successful:
Monitoring All Your Spending
Taking active interest in where and how much of your hard earned money is going out of the account takes time.
You may want to check your balance daily to ensure that you are sticking to your budget.
Remember those envelopes that Dave Ramsey suggests? They require receipts, written amounts, and strict following to be effective.
If you need help tracking your expenses, we have an inexpensive workbook to help you do just that: Monthly Bill Payments Tracker
Avoid Temptations that Cause Overspending
When handling purchases via plastic cards, it is easy to overspend because you aren’t seeing the physical money leave your hand. To get out of the habit of overspending, avoid the bad habits.
If you know that you cave to a drive thru coffee on Monday mornings, try programming your coffee maker on Sunday nights and it’ll be ready when you wake.
Many times, overspending can be avoided by building good habits. Setting up your account with alerts when you’ve made purchases is a good way to get into good habits.
The latest bank apps can send a text or email when you’ve been actively using your card. You can use these as reminders of how much you’ve spent and how much you have left in your account.
Consider Reading: What Is the Best Budgeting App? Budgeting Made Easy
Another good habit to form is waiting to buy something. This eliminates impulse spending. In most cases, impulse purchases are regrettable and often kill our budgeting.
Take some time to ponder the value of the item and if your finances can afford the hit.
In addition, some individuals self-impose a spending freeze. When you need to tackle debt, you stop buying anything other than essentials for a designated time period.
This is extremely helpful with overspending.
Take the Envelope Challenge
Increase Savings with Linked Accounts
The most convenient and easy way to save money when budgeting through your debit account is via linking your checking with your savings account.
This makes it easy to prioritize putting money in savings before you spend any. With automatic transfers setup, you won’t even have to think about it.
Another advantage to linking accounts is when you need to use savings for your goals, it is easily transferred from one account to another.
However, do not get in the habit of transferring to compensate for overspending.
What Does Dave Ramsey Say About Debit Cards?
So what does finance guru Dave Ramsey think about debit cards? Well, he suggests the use of a debit card to avoid getting into debt.
However, Ramsey stresses that it takes extreme discipline to budget with a debit card.
Is it Easy to Overspend With a Debit Card?
As a society of plastic consumers, it is easy to overspend when we don’t physically see the cash going out of our hands.
It has been the topic of many research studies, points out Consumer Reports, as cash is used less and less.
Even if you think this only applies to credit cards, you’ll soon discover it is easy to overspend with a debit card.
The results are either coming up short for bills or accruing overdraft fees that wreak havoc on your finances. Knowing that it is easy to overspend is the first step in avoiding it.
Can You Save Money With a Debit Card?
There are two ways to look at saving money: short term and long term.
With the use of a debit card as your budget method, you may be able to save money if you are extremely disciplined and do not go over your specific budget amounts.
As mentioned earlier, linking accounts can give you the opportunity to transfer savings amounts before you make any purchases within your budget.
In the long term, using a debit card does not help build credit so you will end up spending more on future loans because a lower credit score usually equates to higher interest rates.
This is where a credit card does more for you financially.
Save with our new Savings Challenge Planner
How Do You Use a Prepaid Card for Budgeting?
Perhaps you know you won’t have the discipline to budget well with a debit card. This is when a prepaid card would be a good training tool to get you started.
With a prepaid card (think along the lines of a gift card) you will allot a certain amount of money to the card for purchases. When the money runs out, you are done with purchases.
This allows you to avoid hefty overdraft fees or cutting into your savings.
Top 5 Cheap Prepaid Debit Cards
Because some prepaid debit cards charge fees, let’s look at low to no-fee options out there:
- Bluebird by American Express offers a prepaid debit card with no monthly fees and no charges for reloads if done at Walmart. It also offers budgeting assistance.
- Fifth Third Access 360(degrees) Reloadable Prepaid Card offers a low $4 per month fee with waiving options. This card boasts the largest network of free ATMs.
- FamZoo is ideal for families because it offers options for sub accounts. Its fees are anywhere from $2.50 to $5.99 each month depending on the subscription.
- Greenlight (this was mentioned in the kids finance article so good place to link over to that article if you want) is designed for kids and parents to work together to create healthy financing habits. It can carry multiple accounts and has parental controls and only charges $4.99 a month.
- Walmart MoneyCard is particularly great if you shop at Walmart for most things. The card offers 3% cash back on the website and app purchases. It also offers sub accounts and it has a 2% interest on savings up to $1000.
In Conclusion: How to Budget With a Debit Card
If a debit card is the way you want to budget it will take serious discipline and a bit of your time.
Through constant monitoring and a ‘savings first’ mentality, you can surely hit those savings goals in no time.
Whether you use the tools in an app or you discover that a prepaid card is the way to go, budgeting with a debit card can be very successful.