Readers may recall that
last week, I purchased a new Dell laptop. I wasn't the only person I know to pad Dell's bottom line last week, either. A coworker — my
guru-in-training, actually, who goes by the name of Matt — here at work bought one also. (Although his notebook will be tons nicer than mine.)
When I purchased my laptop online, I charged it to my rewards-paying credit card. Everything went ultra-smooth. Matt, conversely, billed his order to his debit card. (Without a general-use credit card, he didn't have much choice.) And thanks to that, he received a first-person lesson in why debit cards can lousy choices for large purchases.
I detailed this problem with debit cards in another article, entitled
"Death of a Debit Card." I'm sure not the first person to note that big purchases and debit cards don't always get along real well.
Since this particular instance hits a little closer to home, I'd like to run through it here. The blow-by-blow went something like this:
Tuesday, Aug. 16Matt visits his bank, depositing funds in bank account and requesting withdrawal-limit raise.
Places order for computer, using debit card.
Dell attempts to withdraw entire purchase amount (~$1900) from account. This fails.
Matt receives email from Dell, notifying that the withdrawal failed.
Wednesday, Aug. 17
Matt checks his account. Full balance shows as available. Calls Dell.
Over the phone, Matt authorizes Dell to withdraw one transaction of ~$950 (roughly half the invoice amount) from his checking account. He is to call back the next day to authorize the second installment.
Later, another email arrives from Dell, identical to that of Tuesday. They had attempted to preauthorize the funds, it said, and failed.
Thursday, Aug. 18
Matt's account now shows two separate $950 transactions from Dell, for a total of ~$1900. He calls Dell, checking to make sure that everything is okay — and that he isn't going to be billed for yet another $950, as per the previous day's phone call. Dell says that everything is fine, and that they will resolve any problem with his bank.
Matt calls the bank to explain the situation. The banks tells him that Dell attempted to debit the full order amount ($1900) from his account, then later tried to debit half the order amount ($950). The bank tells him that the 50% amount is just a preauthorization, and that it may not go through. Even if it does, they assure him, they will not charge any overdraft fees.
At roughly 10:30pm, Matt attempts to use his debit card at a restaurant. It declines.
Friday, Aug. 19
Matt tries to use his debit card for lunch; it declines again. He heads for the bank to withdraw some cash via teller. The teller informs him that his balance is -$441.
Back at work, Matt checks his account. It now shows three preauthorized charges of $950 each. The bank tells him he must wait another 24 hours before he can have access to funds. (Standard banking procedure to allow for any preauthorizations to clear.)
Evening finds Matt borrowing money from a friend for gas and food.
Saturday, Aug. 20
Checking account returns to usable status.
So what might one do to avoid a mess like this?
(1) Use a credit card for large purchases. And pay them off before interest accrues, of course. Even though guys like Dave Ramsey swear there is absolutely no need to own a credit card, I'm here to say that that's a stupid idea. Thanks to Matt's situation above, as well as my job, I've seen debit-card users unnecessarily inconvenienced way too many times. So I cannot encourage a debit-card-only existence. A general-purpose credit card, coupled with some financial discipline, takes care of the issue entirely.
(2) Open a second checking account, and use it for nothing other than large purchases. Another coworker employs this plan, and it's been successful for them so far. Whenever she plans to make a big purchase, she transfers money from her savings account to a second checking (debit-card enabled) account with the same bank. She uses the debit card associated with that second account to make the purchase. This way, if there are problems, only the second account is tied up, leaving her main checking account free for all the usual stuff.Labels: Banking, Credit Cards, Debit Cards
