Best ways to use your debit card

Most adults in the UK have a bank account. Although many people still prefer using cash, there’s no denying that having access to a bank account is almost instrumental as the world advances through the digital age. Usually, you might start with a child’s account which once you turn 18 is automatically updated to an adult account.

Whether you have your wages paid into it, or you use several different accounts to manage your finances, most people will have an associated debit card for making day to day purchases and online orders. However, there are ways you can use your debit card to your advantage and other times when cash may still be a beneficial way of budgeting, even as we move towards a cashless society.

When should I use my debit card?

Debit cards are great for making day to day purchases without carrying loads of cash around. As most places will now accept payments by card, it’s very easy to make quick purchases without realising you’re even spending money.

If you’re quite good at budgeting and allocating your income across your various outgoings each month, then using a debit card to make normal purchases like coffees and clothing probably isn’t much of a problem. However, if you find that you often spend more than you intend to without even realising (also known as invisible spending), then budgeting in cash may be more suitable in your situation.

How do I budget with a debit card?

It can be tricky to budget with a debit card because you can’t necessarily track how much money is going in and out of your bank account. Although you may have mobile banking or online banking, it can be difficult and time consuming to categorise each payment and try to work out where you could be saving money.

The quickest way to track your spending and therefore budget more efficiently is to download a spending tracker to your mobile phone. They normally only work if you have mobile banking, but the app links with your bank account and automatically organises your payments into categories like bills, services, food shopping etc. It’s a really clear way of seeing not only how much you spend but also where you are spending the most. Although priority bills can’t be avoided, there is probably a lot of ‘invisible’ spending that you don’t even realise you are doing.

Alternatively, there are bank accounts – particularly neo banks – which have this feature built in. Although you would have to open a new bank account, you would be able to clearly see where your money goes without doing anything other than making payments through that bank account. Most of these new neo banks will also have an attached saving facility so you can easily put money into a virtual savings jar as well.

I’m struggling to budget using a debit card

If restricting your payments and counting each purchase is a little tedious for you (we don’t all have the time to meticulously track our spending) then budgeting in cash might be the best option. Although most of your priority bills like rent, water and car insurance payments will come out of your bank account, there’s no harm in withdrawing a set amount of cash at the start of each week and restricting yourself only to that amount.

Because you can physically see the money and you actually hand over the cash when making payments, it can make it easier to visualise how much you are spending and where your outgoings could probably be reduced. If you find you have spare cash at the end of the week, think about putting it away into a piggy bank or something similar and save it for emergency payments or even just a nice treat on your birthday.

Alternatively, if you find you don’t have enough cash to get you through the week, you might want to adjust your budget or ask yourself why the cash isn’t quite stretching. Are you buying additional food throughout the day on top of you weekly grocery shop? Maybe you had to put a full tank of petrol in the car which you hadn’t realised had got so low, or maybe you just walked past a sale and couldn’t help but pop in (we get it, you’re only human). Whatever it is, try and pinpoint which payments aren’t necessary and think twice before making the same purchases again the following week.

A lot of being able to manage money well comes simply from being more aware and more conscious of what you are spending your money on.

Making big purchases on a debit card

Sometimes, we have to make bigger purchases than the normal day to day expenditure. Maybe it’s a nice family holiday or, less fortunately an expensive car repair, either way it can come as a shock or something we’ve not really been budgeting for.

Although you may have the money available in your current account, there are wider consumer protections on purchases made by a credit card, so it might be better to make the purchase on a credit card if you know you can repay the balance in full as soon as it appears on your statement. If you have a 0% interest rate credit card, then you might be able to pay only the minimum payment without accruing interest – although it’s important to remember that as this will take you longer to repay your borrowing, it’s advisable to repay as much as you can afford as soon as you can afford it.

However, if you don’t have a 0% credit card then interest can accrue quite quickly on large repayments, so only put a purchase on your credit card if you know you can afford to repay it immediately. Things like holidays shouldn’t be put on a credit card or bought with a loan if you know you can’t afford to make the repayments on time.

Alternatives to credit cards

If you need access to cash quickly but you don’t have a credit card or you don’t qualify for a low interest rate credit card, then a short term loan might be able to help you out. While you may budget seamlessly for most months, life can throw a curveball that causes you a cash shortfall for the rest of the month.

A short term loan could help you bridge the gap between your paydays and help you manage your cashflow between emergency expenses and priority bills. At Clear and Fair, we compare short term loans to find you the cheapest loan that suits your requirements – be it for a few days or over a couple of months.

While you could get the cash you need almost immediately, you should never apply for a loan if you don’t really need it or if you knowingly can’t afford your repayments. Borrowing should be a considered decision, so make sure you’ve budgeted to accommodate any unexpected bills or if it’s too late, make sure you budget to accommodate your loan repayments.