An expensive mistake, and a request for recommendations

[Lady Henevere]

I have been through a crappy ordeal over the last few days, and I'm wondering if you all may have some helpful advice. (You usually do!)

I recently made a mistake with an automatic withdrawal from my checking account, and by using my debit card for daily purchases (gas, groceries, and various purchases while on a business trip), I accidentally racked up overdraft charges that exceed what the average American family pays in rent. I'm furious at myself and my bank (which neither informed me that anything was amiss nor reduced the charges to any appreciable degree), and I clearly need to make some changes to the way I do my banking.

I was using my debit card mostly because I could track where my money was going (which is not so easy with cash). But now I am second-guessing this strategy. Since you all are a wise and frugal bunch, I would love to hear anyone's opinions on whether it is better to use debit cards, credit cards, checks, or cash for daily transactions like groceries, etc., and why you think so. Many thanks for any information.

Ldychef2k, if you read this -- YES, this dumb mistake has dyscalculia written all over it.

 

[k0xxx]

I believe that most of us have been there at one point or another.

I personally prefer cash. It's a lot harder for me to turn loose of my cash than it is to swipe the piece of plastic. Plus, it's hard to hard to get overdrawn using cash.

We leave enough in our checking account to handle our monthly automatic withdrawals, the rest is taken in cash, or moved to our savings account.

 

[reinbeau]

I check my account religiously online. I keep a close eye on it. I do have overdraft protection via a personal line of credit ($2,000 limit, I'm never near it at all!!) so I don't rack up fees if I go over, if I do, I pay it off with the next deposit. Anyways, the best way for me to keep track of it is to do it online. I bank with a local credit union, no fees, I don't use ATMs outside of the network, so I never pay any fees at all.

A good tip is to get cash when you shop, especially if you're away from home and out of your network - go to Walmart, buy a pack of gum and get the extra $40 or whatever. No fees, just the cost of the gum

 

[me&thegals]

We do everything on credit card, mainly because it build up air miles for us, but also it is easy to pay off each month without constantly tracking our balance.

I have occasionally caused overdrafts. If it almost never happens, try asking for them to forgive this time. I have asked this about 3 times over the years and they have always waived the fees for me. Doesn't hurt to ask!

 

[Ldychef2k]

Oh lordy, can I relate. I actually went to all cash or money orders for five years not long ago because I made such a mess of it.

I do not use credit cards. Let's just not even think about that. The number one rule in my house is if I can't pay for it out of my pocket, I save up for it. Most of the time, when it comes to handing over the greenbacks, I decide I don't need it after all.

Basically, my method is this:

The direct deposit comes in whenever it feels like it (I don't have a regular payday). I pay all my bills online. Every single one of them. I let the bank give me the total of my payments, and then I subtract that from the balance. I wait a day to make sure I didn't make a mistake, and then I go to the bank and withdraw all but a token amount. I allow myself an allowance for food and then put the rest away for whatever may come up. I no longer use my ATM because I do not trust myself with it. Well, there is an exception. When I want to order something online, like dehydrated eggs or discount vacuum seal bags, I go to the bank and deposit enough to cover it, and then use my ATM.

After having had month after month of overdraft notices, I had to come up with something, and this worked for me.

 

[Big Daddy]

I believe that most of us have been there at one point or another.

I personally prefer cash. It's a lot harder for me to turn loose of my cash than it is to swipe the piece of plastic. Plus, it's hard to hard to get overdrawn using cash.

We leave enough in our checking account to handle our monthly automatic withdrawals, the rest is taken in cash, or moved to our savings account.

I 2nd that. ATM cards are too easy to spend with. Pay bills on line or with checks and save what you can in a separate account then take the rest out in cash. When the cash is gone you're done. If there is an absolute must have situation, use the savings. Those overdraw charges should be against the law. They're as bad as the CC companies that ok a purchase over your limit then charge you a fee and jack your interest. They hope you'll overdraw.

 

[shareneh]

Shred that debit card and any other household member's cards. My bank charges 23 dollars for each overdraft and six dollars a day after so many days. Banks make their money off you by letting you go over. If you have to go over then write a check for an amount that will get you through til pay day.

The best thing to do is to call the bank. If it's your first time messing up they will more than likely forgive the debt. Do Not tell them you are retiring your card. That will not give them the incentive to be nice. Then, go over your budget and give your household X amount to live on with bills, groceries and entertainment. The rest of your money is only for "rainy day" money. That means it better be raining hard before you touch it.

Use cash to pay your bills until you get things under control. After you have trained your family to live on less and yourself to plan ahead you will be able to go back to checks, but not debit cards. Debit cards are just to easy to use and give you false confidence.

That's what I had to do anyway. Gosh, I messed up so bad I thought the sheriff would show up at my door any day. It's checks now for me but I had to learn all over again with cash first. Now I have a savings account that I use to buy my household items and things that aren't bought on a regular basis.

Oh, and to save money right now, stop shopping for anything at all for a month. I know this sounds crazy but we all have pantries and freezers full of things we would eat if we HAD to. Then, when you are back in the black, only shop about every five weeks or so. This means anything, groceries, animal supplies and toiletries. I know it sounds harsh but you would be suprised how fast a person learns to do without when they are without.

Oh, and don't think the family is gonna like it, they are gonna squirm and whine like baby piggies but just stand your ground. They will settle in and you will be able to purchase what you need. You might even be able to buy some good stuff that you have wanted for a long time but haven't been able to afford thanks to that stupid debit card.

Edited by shareneh to add more words of wisdom LOL

 

[FarmerChick]

I am like Ann.
I have overdraft protection. It is free. Check with your bank. It is perfect protection for a small overdraft. Rarely does it happen to me but when it does, I pay no fees, the bill gets paid and I am safe. I check online statement every 2-3 days and when I see this happen by mistake, I just pay it off immediately. Everyone should have this free overdraft--why wouldn't anyone? lol


I use my credit card for rewards and cashback. I am sure I pay it off each month and it works fine to have for emergency needs also.

I do not carry alot of cash. I pay with a check or credit card in everything I do. I never use debit card.

 

[punkin]

I use my debit card alot. I may write 5-6 checks per month. Some banks charge a fee for writing over "X" number of checks. If I need extra cash, I go to an in network ATM, mostly because I can also check my balance. I have been known to do the Walmart gum thing, too.

We use credit cards, too, for the rewards points. Especially in DH's business, we can rack up rewards. We always pay them off every month, so no interest fees.

 

[Dace]

I have always found that I spend less and am more thoughtful with my purchases (as in no impulse buys!) when I use cash.

The best system that we have ever used (been married 20 years) is to sit down in advance (before you get the first paycheck of the month) and plan where every dollar will go. Spend it all....including a portion to savings and a small portion for misc, you know those little things that always pop up when you are not expecting them. When I say spend it all I do not mean frivolously, I mean determine in advance where each dollar will go.

Use an envelope system. I put the grocery money in one envelop, gas money in another, entertainment money etc...you get the picture.It really helps to cut down on extra spending when you know that all of your cash for the month is there and there is no option of going to the bank to get more! Put all receipts in the envelop and at the end of the month, as you are deciding how to spend next months money...take a few minutes to evaluate your last months spending and adjust as necessary. I always try to leave some grocery money in the envelop and transfer over to a little slush fund