Canine
Well-known member
Firstly, knowing that credit can be misused and the resulting consequences is important to know. I don't have a problem with it, but lots of people do. I have a checking account and have at times, when I was young, made mistakes with it. I'm also not perfect with my credit card, but pretty close. Definitely not so bad that I'm paying late fees, over the limit fees, or interest. I will occasionally pay a small amount of interest for a couple weeks or so. I have a friend that can't even keep a checking account because she is so bad with money. Honestly, I don't understand how one can get into some much trouble, excluding extenuating circumstances, that financial ruin quickly ensues. But being aware of it is important. The following is information on different options, relative to each other, on how one can manage and use their money/credit.
Credit cards are revolving credit. You don't need to ask for a loan each time you need money, you just get the money immediately in your hot little hands. Some offer rewards that you get back when using their card. Those rewards are lost from interest if you don't pay the bill in full at the end of the month, and interest rates on those cards are high. If you want a basic card, those have the cheaper rates (not always) and the FICO score required isn't as high. Then it goes up from there. You can have annual fees or not. You can get NHL, NFL, NBA, etc. cars. Sam's and Costco offer rewards cards that wave the annual fee with relatively high rewards. There are gas cards, miles cards, flyer cards, and just about anything you can think of. You can get one as complicated as you want or a simple one. Some cards offer car rental insurance, travel insurance, increased warranties, and more. Since many of us travel, a card that offers a high return on fuel is appealing. Those of us that have large families may prefer high rewards on groceries. Sometimes you can get special offers that aren't yet available to the public like concert tickets. Better acceptance when out of the country.
You can also get a secured card. You put up collateral in the form of a CD or something like that and you can get a credit card. It has all the perks and works the same as a non-secured card.
Charge cards work the same as credit cards except you must pay the balance in full at the end of every month.
Debit cards DO NOT work the same way as credit cards, nor do you get the perks that automatically come with credit cards. A debit card is a lot like having a checking account. Debit cards have more risk than credit cards. They are similar in that they are sponsored by VISA or Mastercard. You can swipe them to buy stuff or you can enter the number online for purchases. Should a card become compromised, a credit card has to foot the bill except for the first $50, but most of the time they will not make you pay for any fraudulent purchase. I've had it happen to me three times so far and have paid $0. With a debit card, you are on the hook for all of it. If the crook drains your account, it's on you; however, banks will often put that money back into your account at their expense, but they aren't required to. Debit card usage does not increase your FICO score. You don't need good credit to acquire a debit card. Costco quit accepting credit cards, but love those debit cards. You can still use a credit card online for Costco. If your bank account is hacked and you have outstanding checks or automatic withdrawals, at about $30 for each over-the-limit fee, you could have a costly situation. A much more costly situation than if it had occurred with a credit card. The legal protection offered to debit cards is much, much lower.
When using a debit or credit card at a gas station, be aware that your card will have a "hold" put on it to make sure you have enough cash/credit available to make the purchase. This can be up to $75 and up to $150 at truck stops. Then the hold can be on your card for up to 3 days. Often it is just a few hours. I'll tell you what happened to me. My dog started having seizures, so I made an emergency trip to the vet, which was expensive. A couple days before that, I had made a large purchase, so my card was getting "full". I still had about $300 left and had a break down and needed to charge a part. (When it rains, it pours!) The part was something like $250, so I easily had enough credit, but the charge was denied. This surprised me, but I make mistakes, so I went to the bank to fix the error I had likely made. Turns out I didn't make an error. When the vet charged me on a Saturday, the card wasn't actually charge, but a hold had been put on it. Then on Monday, the card was actually charged. The amount was about $750, but I still had a hold of $750 for a total of $1500 which easily put me over my available credit. Holds don't come off immediately after a charge- they come off sometimes several hours later. This is what happened to me. I happened to try to use my credit card during that period where the card was charged yet still had a hold on it. The same can happen with a debit card.
Also, the bank rep explained to me sometimes an employee like a clerk at a motel will swipe your card to see if it has enough money on it to rent a room. Let's say the room is $100 with tax. When the clerk checks the card, a hold is put on it. Then when the card shows there is enough money, that clerk will swipe it again and charge the card, but that puts another hold on it. So two holds plus one charge is $300. This is not a common occurrence, but it can happen. Good information to know for both credit cards and debit cards.
PayPal sucks. I had it and made many hundreds of dollars on Ebay. I enjoyed the heck out of it for the most part, but when I learned of the bad things that can happen, I stopped using my Ebay account. That was a sad day for me. Most of the negative applies to sellers, but can also affect buyers. PayPal is attached to an account. PayPal isn't governed by banking regulations because it isn't a bank, so they have tremendous amounts of leeway and far less legal accountability when it comes to doing whatever the hell it is that they want to do with YOUR money. They can freeze your account almost on a whim. You can be left without use of your funds for months while they have your money. Do they use that money for themselves to gain interest on investments? Maybe, but who knows. As far as I know you aren't allowed to know what they do with YOUR money while your account is frozen. To get away from PayPal you can use a merchant account, but that costs money. You can also use a separate bank account and if that is frozen, you still have access to the funds in the other account. I've had conversations about this with other people and they say they love PayPal and wouldn't change it. I really liked PayPal, too, but the risk of losing my business so easily and having my credit wrecked from potential arbitrary and overly punitive actions of PayPal was too much for me. If you want to learn more, go to www.paypalsucks.com.
I'm not an authority. We each have our own comfort levels in regards to risk management. Some people swear by cash and refuse any kind of credit, and that is fine. Nothing wrong with that at all. If that is your choice, I totally respect that and may even encourage it. For those of us that want to use some type of payment method other than cash, hopefully this information will be a springboard to help educate you to use your moneys in the most efficient, safest way possible. Each method has its own pros and cons and not one method is the best method for every transaction you may encounter. Bartering is uncommon, so we need to accept the way money is handled and that is a fluid situation. We should periodically check in on how we spend our money and adapt to make the best decisions.
Credit cards are revolving credit. You don't need to ask for a loan each time you need money, you just get the money immediately in your hot little hands. Some offer rewards that you get back when using their card. Those rewards are lost from interest if you don't pay the bill in full at the end of the month, and interest rates on those cards are high. If you want a basic card, those have the cheaper rates (not always) and the FICO score required isn't as high. Then it goes up from there. You can have annual fees or not. You can get NHL, NFL, NBA, etc. cars. Sam's and Costco offer rewards cards that wave the annual fee with relatively high rewards. There are gas cards, miles cards, flyer cards, and just about anything you can think of. You can get one as complicated as you want or a simple one. Some cards offer car rental insurance, travel insurance, increased warranties, and more. Since many of us travel, a card that offers a high return on fuel is appealing. Those of us that have large families may prefer high rewards on groceries. Sometimes you can get special offers that aren't yet available to the public like concert tickets. Better acceptance when out of the country.
You can also get a secured card. You put up collateral in the form of a CD or something like that and you can get a credit card. It has all the perks and works the same as a non-secured card.
Charge cards work the same as credit cards except you must pay the balance in full at the end of every month.
Debit cards DO NOT work the same way as credit cards, nor do you get the perks that automatically come with credit cards. A debit card is a lot like having a checking account. Debit cards have more risk than credit cards. They are similar in that they are sponsored by VISA or Mastercard. You can swipe them to buy stuff or you can enter the number online for purchases. Should a card become compromised, a credit card has to foot the bill except for the first $50, but most of the time they will not make you pay for any fraudulent purchase. I've had it happen to me three times so far and have paid $0. With a debit card, you are on the hook for all of it. If the crook drains your account, it's on you; however, banks will often put that money back into your account at their expense, but they aren't required to. Debit card usage does not increase your FICO score. You don't need good credit to acquire a debit card. Costco quit accepting credit cards, but love those debit cards. You can still use a credit card online for Costco. If your bank account is hacked and you have outstanding checks or automatic withdrawals, at about $30 for each over-the-limit fee, you could have a costly situation. A much more costly situation than if it had occurred with a credit card. The legal protection offered to debit cards is much, much lower.
When using a debit or credit card at a gas station, be aware that your card will have a "hold" put on it to make sure you have enough cash/credit available to make the purchase. This can be up to $75 and up to $150 at truck stops. Then the hold can be on your card for up to 3 days. Often it is just a few hours. I'll tell you what happened to me. My dog started having seizures, so I made an emergency trip to the vet, which was expensive. A couple days before that, I had made a large purchase, so my card was getting "full". I still had about $300 left and had a break down and needed to charge a part. (When it rains, it pours!) The part was something like $250, so I easily had enough credit, but the charge was denied. This surprised me, but I make mistakes, so I went to the bank to fix the error I had likely made. Turns out I didn't make an error. When the vet charged me on a Saturday, the card wasn't actually charge, but a hold had been put on it. Then on Monday, the card was actually charged. The amount was about $750, but I still had a hold of $750 for a total of $1500 which easily put me over my available credit. Holds don't come off immediately after a charge- they come off sometimes several hours later. This is what happened to me. I happened to try to use my credit card during that period where the card was charged yet still had a hold on it. The same can happen with a debit card.
Also, the bank rep explained to me sometimes an employee like a clerk at a motel will swipe your card to see if it has enough money on it to rent a room. Let's say the room is $100 with tax. When the clerk checks the card, a hold is put on it. Then when the card shows there is enough money, that clerk will swipe it again and charge the card, but that puts another hold on it. So two holds plus one charge is $300. This is not a common occurrence, but it can happen. Good information to know for both credit cards and debit cards.
PayPal sucks. I had it and made many hundreds of dollars on Ebay. I enjoyed the heck out of it for the most part, but when I learned of the bad things that can happen, I stopped using my Ebay account. That was a sad day for me. Most of the negative applies to sellers, but can also affect buyers. PayPal is attached to an account. PayPal isn't governed by banking regulations because it isn't a bank, so they have tremendous amounts of leeway and far less legal accountability when it comes to doing whatever the hell it is that they want to do with YOUR money. They can freeze your account almost on a whim. You can be left without use of your funds for months while they have your money. Do they use that money for themselves to gain interest on investments? Maybe, but who knows. As far as I know you aren't allowed to know what they do with YOUR money while your account is frozen. To get away from PayPal you can use a merchant account, but that costs money. You can also use a separate bank account and if that is frozen, you still have access to the funds in the other account. I've had conversations about this with other people and they say they love PayPal and wouldn't change it. I really liked PayPal, too, but the risk of losing my business so easily and having my credit wrecked from potential arbitrary and overly punitive actions of PayPal was too much for me. If you want to learn more, go to www.paypalsucks.com.
I'm not an authority. We each have our own comfort levels in regards to risk management. Some people swear by cash and refuse any kind of credit, and that is fine. Nothing wrong with that at all. If that is your choice, I totally respect that and may even encourage it. For those of us that want to use some type of payment method other than cash, hopefully this information will be a springboard to help educate you to use your moneys in the most efficient, safest way possible. Each method has its own pros and cons and not one method is the best method for every transaction you may encounter. Bartering is uncommon, so we need to accept the way money is handled and that is a fluid situation. We should periodically check in on how we spend our money and adapt to make the best decisions.
