I’m often asked if the emotional separation inherent in credit card usage also applies to debit cards.  To the dismay of avid debit card users everywhere, I believe it does.

You: Why?

Debit cards are made of plastic.

You: The material matters?

No, it’s not the material that’s at issue. Debit cards are superior to credit cards since, for the most part, you must actually have money in your linked checking account in order to complete a purchase.

You: Why do you say “for the most part?”  You can’t borrow with a debit card.

Actually, with most debit cards you can, even without knowing it.

You: What?

Even if you do not have sufficient funds available in your checking account to complete a specific purchase, many banks will allow the transaction to occur anyway.  If you don’t have true overdraft protection, the bank will probably assess you fees for bounce protection or for your courtesy overdraft.

You: Some courtesy!

Theoretically, such expenses can be even larger than the interest you might have incurred using your credit card!

You: That’s disgusting.

I agree.

You: But let’s say I would never use a debit card in a way that exceeded my balance.


You: So now what do you think about my using debit cards?

Debit cards allow you to purchase things yet avoid carrying around a credit card, a lot of cash ,or <gasp> a checkbook.

You:  Carrying a debit card is like walking around with my entire checking account balance in my wallet.

And that’s what concerns me.  Cash feels much more finite.

You: What do you mean?

Let’s say your goal is to limit your spending to a total of $100 over the next three days. Imagine two different approaches:

  1. You leave your home on day one with exactly $100 in cash and no plastic in your wallet.
  2. You leave your home on day one with no cash or credit cards but with a debit card.  Your checking account has a balance of $945.78.

Is it theoretically possible to track your spending to ensure you don’t spend more than $100 even though you have nearly ten times that amount available to you?  Of course.  But would you want to?

You: Probably not to the penny, but I could still get a decent sense for where I was versus the $100 objective.

But how does a debit card keep you any more emotionally connected to your money than a credit card?  You could annoyingly track your spending with each.  Furthermore, you do not feel the pain of physical separation from your money when you use either type of plastic.  Without the physical loss, there is less of an emotional loss, causing periodically different spending decisions.

You: I’m still not borrowing with a credit card!

Agreed, and that’s why a debit card is superior to a credit card when you’re trying to limit spending.  But when it comes to retaining an emotional connection to your money, neither is anywhere as effective as good as old fashioned greenbacks.

You: Greenbacks?

Yeah, cash. See how separated we’ve become?

Related: The Top Five Lies We Tell Ourselves About Using Credit Card Usage

I know there are some strong opinions out there – what are yours?

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4 Comments to “Do Debit Cards Separate You From Your Money Emotionally?”

  1. erica says:

    I only keep what I’m allowed to spend in my checking account ($300 every two weeks for groceries, gas, dining out, walking around money, etc.). Any other bills that are paid out of the checking account the money is basically passed through (gets paid as soon as I get a pay check; everything extra (above the $300) is transfered to savings). This works pretty well on keeping me on track. I used to also use my AmEx card (AmEx because it had to be paid off monthly), but have done away with that as I don’t do a good job of keeping track of it.

  2. Anonymous says:

    I know this has to be true. However, I have a problem w/ plain, ‘ol cash, too. When I have a pocket of 20’s or even a few 100’s, I feel wealthy and spend it. Cash in pocket = hole in pocket. Now the money’s gone and I don’t even know what I spent it on. LOL

  3. Michael says:

    @Ray: Thanks.

    @Erica: Your system is a good one, and creates that sense of finite resources critical in obtaining an objective. You’re also spending what’s left instead of saving what’s left – a good strategy to be a successful strategy. Thanks for sharing.

    @Anonymous: I’d try carrying less cash with you – see if it helps. Create that sense of finite resources. I know I wouldn’t feel confined with a few $100s on me. Let me know!

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