Many of you are stuck in an interesting Catch-22: You believe that credit cards lead to over-spending, but you like the protection they provide to your checking account by adding another layer between thieves and your “real” money.
I believe I have a solution that will get you one step closer to protecting that hard-earned money. It’s a two-account checking system that creates those other layers you crave while keeping you out of credit card debt and out of trouble.
Here’s how it would work:
This would be your “safe” account. Only “trusted” transactions would be allowed from this account, such as transfers into Account #2, reliable bill payments, retirement and college savings withdrawals, and other similar transactions.
You may or may not keep a debit card for accessing this account, but you would definitely keep it out of your wallet.
This is your “at-risk” account. You would use the money here for day-to-day debit transactions, withdrawing cash, and writing checks. Money kept here could have a shelf life of 7 days or less—in other words, it’s what you think you’ll spend during the week on groceries, gas, entertainment, and everything else.
The key is to make sure there is no link between the debit cards for the first and second account, and that your PIN is unique for each! Otherwise, a thief who figures out your PIN will be able to withdraw from both accounts. You should, however, have the capability to transfer between the accounts online.
If your finances are like ours, 80% of your money would always stay in Account #1, and the remaining 20% would be transferred to the risky account in weekly increments.
This system would protect the majority of your money from some of the same problems credit cards are good at shielding you from:
- Theft of your card.
- Misuse of debit card number (If you don’t keep a debit card for Account #1, this is an extra layer of protection. If you do, that’s still a card you don’t carry around with you.)
- Accidental over-charging.
In addition, you give yourself an artificial floor for your weekly spending (when account #2 runs out of money!) that might help with budgeting, too.
It’s Not Savings
Splitting your money into these separate accounts isn’t intended to create a checking/savings relationship. Both accounts should hold money you intend to spend within 30 days (with some reserves, of course).
A savings account is a necessary and completely separate deal from the two accounts I’m proposing here, but use it for your long-term reserves, emergency funds, and whatever else you already have set up.
Do you think this system would help protect your money better, while still letting you use debit cards for your daily purchases?