Debitize: Will Making Your Credit Card Feel Like Debit Help You Budget? ($10 Bonus)

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debitizeappIn our increasingly cashless world, I prefer to use credit cards over debit cards for a few reasons:

  • Credit cards usually have better cash back, points, or rewards programs.
  • Credit cards have additional features like free checked bags, extended warranties, and price drop protection.
  • Credit cards have more consumer protections explicitly required by federal law.
  • Having a certain amount of revolving credit card usage with a good payment history improves your credit score.

A major benefit of debit cards is that it feels more like “cash”, so it can be easier to control your spending. When you make a debit card purchase, your bank balance is immediately reduced so you know much money you have left. If this helps your manage your cashflow, it can help you avoid credit card debt. Indeed, if you try to buy something with a debit card and your bank account has a zero balance, the purchase will be rejected (depending on your specific settings, some banks allow small overdrafts).

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Debitize is a new start-up that makes your existing credit card feel more like a debit card. I had no idea this was a thing. Apparently they were profiled by the NY Times. Basically, you link up both your credit card and bank account, and they will match up your credit card purchases and take the same amount out of your checking account on a daily basis (weekdays). The money accumulates in your Debitize Reserve Account, and then they pay off your credit card bill when it is due each month.

We initiate withdrawals once a day on weekday mornings. Typically it takes one more day to hit your checking account. So if you go to the movies on Tuesday night, we’ll initiate the withdrawal on Wednesday morning and you will see the funds out of your checking account on Thursday.

You keep your existing credit card. This means you get to keep all the credit card perks like cash back, airline miles, hotel points, free checked bags, etc. You can still do credit card fraud disputes, refunds, etc.

You keep your existing bank account. You can set a minimum balance that Debitize will never go below so you won’t get hit with any overdraft or low-balance fees, or you may want a buffer for some other reason. Debitize will send you an alert if you hit this minimum balance.

Debitize has a freemium pricing model. The basic functionality is free. They take money out your bank account daily, but only pay the credit card company once a month at the due date. There is also a $3/month Credit Optimizer tier that pays off your credit card balance once every week so that your credit utilization ratio is lower and thus your credit score is higher.

My take? I can see why people would want this feature. Credit card perks. Free. I think Debitize is best for folks that have a handle on their debt, but prefer the feel of debit cards for better day-to-day budgeting.

I think the primary drawback is the added complexity. If someone has problems with credit card balances, they might do better with more simplicity. Focus on paying down that debt. Stick with the plain debit card with no rewards (and no option to carry a balance). In fact, one might go all the way back to physical cash where possible.

Debitize is offering a $10 credit for new customers towards your credit card bill. You must wait until at least 5 automated withdrawals from your checking account have been processed. I am a member of their affiliate program and will also receive a referral fee if you qualify for this bonus.

$10 credit will be applied to your Debitize account and paid towards your credit card bill as long as you have been active long enough to have at least five automated withdrawals. We really just want you to give us a real try — if you do and don’t think Debitize is for you, just shoot us a note.



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Comments

  1. Such a service is not available in my country but I see how it can be good for a majority of the people. For me? Not so much. I have a very tight grip on my money and I have never paid a penny in interest for credit card debt. Terrible CC customer indeed!

  2. Mark Raymond says:

    I agree with you about the added complexity, and the concern for people who have struggled with debt. I don’t drink, smoke, use drugs, or gamble, but I have struggled with overspending, especially during periods of my life when my income has been on the low side. Debitize sounds like a good solution, but whenever there is a “reward” for spending, studies show that most people end up spending more than they would otherwise.

    Thanks for your thoughtful review.

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