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:
Account #1
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.
Account #2
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.
The Benefits
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.
Your Thoughts
Do you think this system would help protect your money better, while still letting you use debit cards for your daily purchases?
Fiscal Fizzle 
Great ideas, Wojo!
At my bank, my friend/account manager setup two additional accounts for my personal and a total of 3 for my non-profit business. This would work well for anyone with a business account:
One is strictly my main account, which I can deposit money into; the second is for internet purchases or if I connect it to Paypal, money coming in electronically; and the third is to write any checks for billing and paychecks to anyone who works for me. I asked her why, since I probably won’t do much of that since it’s non-profit.
She told me she had a client with a for-profit business who wrote a check to a subcontractor, who then used the account number to hijack his checking account! He lost thousands pretty quickly, before the account was closed. I do believe that subcontractor was arrested, but still, what a scare!
If you transfer money into the account that is strictly for cutting checks to workers, they won’t have access to your main account and possibly all your money. It’s a great level of security for business owners.
heath
Great real-life story Heath! I had this suggested for my business accounts as well, but didn’t really think I needed it at the time. Now I’m reconsidering…
I didn’t realize why my banker did this until she told me the story of the guy whose business account was hijacked after he cut a check to a subcontractor. How awful is that? Someone works for you, you pay them, then they use the numbers on the bottom of the check to grab your account!
Separation of exposure principle…Interesting…
Is it possible to trigger overdraft situation via a debit card? If so, you might be creating more problems than solutions, not to mention the time committment required to sustain an account with such a low balance.
I have another suggestion: Carry only one credit/debit card. Write “Ask for ID” on the back of it. Have a phone number for the credit card company in your phone to easily call and replace the card.
The overdraft is a valid concern–not sure if I have a solution other than being careful and on top of things, maybe keeping a small buffer in there?
As for “Ask for ID,” my sister-in-law has had it on the back of her card for the last 5 years, and can count the number of times she’s been asked on her fingers. Just sayin’…
While it’s *fairly* easy to get your money back when your card is stolen, I’ve heard enough horror stories for me to try to come up with a different system…definitely certain this is not the “perfect” solution, so I appreciate your feedback! 🙂
The only problem with having multiple accounts is that most banks are dropping free checking unless you have direct deposit or high balances of cash.
I’m w/ YS on this one. In fact, that is EXACTLY what I do.
I’m a “check-my-accounts-once-a-month” kind of girl. Twice, max. I carry no debt, and have no issues with using credit for EVERYTHING and paying it in full each month. As the amount month to month is fairly consistant, I even have any automatic bill pay set up in my checking to pay a estimated amount on the credit card, just in case I don’t get the the finances that month.
My system is so automated I could really go two months or longer without checking & never have an overdraft charge or a late fee. Worst case would be a little interest on the credit card if that month exceeded my estimate at all.
If this sounds scary as all get out, my advice is you might want to consider growing up (said with the love of a parent <3) You may not go to the extreme I do, God knows I couldn't have done this 5 years ago. But, iIf you continue to believe you are a child, incapable of handling your finances, and continue to treat yourself as such, you will forever behave like just that, a child.
Good Luck!