Finally, an end to the credit or debit question. Use both! Find out how you can easily reap your credit card spending rewards and avoid paying interest in our Debitize review.
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Are you frustrated by the credit vs. debit dilemma? When you pay with a credit card, you get stronger consumer protections and rewards and are building your credit. But you can also run into fees and interest if you over-spend your budget. Paying with a debit card means you have to look more closely at your actual bank account balance. It’s a more disciplined approach.
What if you could do both at the same time? With the Debitize app, you just might be able to. This app claims to combine the benefits of spending via credit card with the financial discipline of sticking to the debit card. Let’s look at how it works and if it might be a good option for you.
|Connect Multiple Credit Cards||✅|
|Easy Manual Shutoff||✅|
|Pricing/Fees||Free or $3/month for Credit Optimizer|
|Mobile App||Available for iphone only|
|Customer Support||Online chat, email or phone|
Debitize works by connecting to both your bank and your credit card account. It’s like a bridge that goes between the two accounts. It looks for spending on your credit card, and then pays off those purchases daily with money from your debit account. So you don’t get to the end of the month and wind up with a huge credit card bill you weren’t expecting. But you also get the rewards and protections of spending on your credit card.
Essentially, Debitize lets your credit card function as your debit card. Since you pull from your debit account each day as you’re spending, you can use your credit card but link your purchases more tightly to your actual bank account balance.
As you make purchases on your linked credit card, Debitize initiates a transfer from your checking account into your Debitize Reserve Account. Spend $5 on your credit card, and Debitize will move $5 from your checking account to your reserve account. When your credit card bill comes due, Debitize pays it for you automatically. So your credit card payments are never late, and the money you need to make those payments is already available.
Withdrawals are rolled together for the day, and they’re initiated on the following weekday morning. And they can take a couple of days to come out of your checking account. So that is something to be aware of as you’re using the app for everyday spending.
One of the interesting features with Debitize is that you can decide which purchases to cover immediately and which to leave on your credit card balance. There are two ways to set limits with the Debitize system:
- Minimum Balance
When you set up your Debitize account, you can set up a minimum balance on your checking account. Once you hit that minimum balance, Debitize will stop automatically pulling funds into your reserve account. Debitize will send you a notification when this happens, so you’ll know you have credit card purchases that aren’t covered.
- Manual Shutoff
Currently, Debitize is working on a feature to let you tell the system when to not automatically cover a purchase. For instance, you might need to make an emergency spend on your credit card, which you’ll pay off over a month or two. In this case, you might not want Debitize to pull money from your checking account. But for now, you can handle this by pausing the credit card’s sync with Debitize when you make that particular purchase. Any purchases you make while the credit card is on pause won’t get “Debitized.” Then you can turn the connection back on when you’re ready to start up again.
What About Uncovered Purchases?
As noted above, Debitize doesn’t have to cover all of your purchases. Whether you have a low account balance one day or your manually tell the system to ignore some purchases, your Debitize Reserve Account may not be equal to your credit card balance. Purchases or balances that aren’t covered are called Uncovered Purchases.
You can see your Uncovered Purchases balance within the Debitize app. These purchases might include:
- Balances that were already on a card when you linked it to Debitize
- Charges you make when your card is paused
- Charges you make when your checking account minimum is in play, so that Debitize can’t make a withdrawal
If you want to pay off your Uncovered Purchases, which you definitely should do so that you can work towards debt freedom, you have a few options. You can schedule a one-off withdrawal through the Debitize app. That’ll get added to your next payment. You can schedule recurring payments to start paying down your balances over time through the app. Or you can just make an extra payment directly to your credit card. Debitize will see this and adjust your Uncovered Purchases balance.
To make sure Debitize always pays down your full balance, you can activate additional recurring payments and leave them running. So if you have $100 in uncovered balances for the month, a $100 automatic additional payment will cover it. If you don’t have any Uncovered Purchases, though, Debitize will just skip (or reduce) that months’ automatic extra payment.
If you’re concerned about keeping your credit in excellent condition, you may want to check out Debitize’s Credit Optimizer tool, which is a paid add-on. Instead of paying your balance off when your bill is due, this tool makes payments to your card once a week. This keeps your overall balance lower throughout the month. So no matter when the credit card company reports to the credit bureaus, your debt-to-credit ratio looks great.
The basic Debitize app is actually free. However, you can pay $3 a month for the Credit Optimizer service, which pushes payments to your credit card company weekly instead of monthly. Other than that, though, there’s no charge for the service.
Signing up for Debitize is easy. You go through a four-step process to create your account, link a credit card, link your checking account, and verify your identity. Note that Debitize creates your Debitize Reserve Account for you. This is an additional account in your name, and you actually can transfer money back to your checking account from the reserve account if you need it.
Debitize does not, however, give you a credit card. You can only use the service with a credit card that you already have. If you need ideas for a credit card to use with this service, check out this list of the best ones this year.
One of the biggest complaints about Debitize is that it can take a while to sync your credit card transactions with your debit card account. Transactions are batched for the following day, and then it may take an additional two days for the withdrawal to actually hit your checking account. That means you may not see the checking account effect of your credit card spending for three days after you spend.
This is still a tighter debit-credit connection than just waiting to see what your credit card bill is for the month, of course. But you’ll still have to maintain a general awareness of how much you’re spending and when so that you don’t run your checking account balance too low.
Debitize takes several steps to ensure security, including using bank-level 256 bit encryption. It also doesn’t store your bank credentials on its servers, doesn’t allow any transfers externally, and gives you account alerts for unusual activity. The Debitize Reserve Account is kept as your own separate account with a banking institution, so there’s no risk of your personal funds being mingled with those of other users.
You can access your Debitize account online through your computer. Or you can download the app for iPhone. There is currently no Android app available, but they’re hoping to get one rolled out sometime in 2018. Debitize does have a nice mobile-friendly web interface, though, so the lack of an app shouldn’t deter Android users too much.
Debitize is a relatively new company, so they’re still working out some kinks in the product. With that said, you can know that your money is safe, and getting customer support is simple. They offer an online chat interface for quick support, or you can email or call support, too. Generally their customer support has great reviews online.
Debitize Pros and Cons
The biggest potential drawback to this software is that you could still overspend on your credit cards if you aren’t careful. If you’re already in a pattern of overspending, Debitize could just lull you into a false sense of security. If you spend more than you have available in your checking account, the app just won’t pay off your full spending. So you won’t overdraft your checking account. But you’ll end up paying interest on your purchases.
Essentially, Debitize lets you avoid paying interest while still reaping the benefits of using credit cards. These include:
- Better protections. Credit cards give you more protections like extended warranties, guaranteed returns, and sometimes even pricing protections. You can also benefit from fraud protections, which makes it safer to use a credit card online.
- Better rewards. A few debit card products offer some rewards. But if you really want rewards on your spending, you need to use credit cards. With Debitize, you can reap the rewards of spending on credit cards without negating those rewards by paying interest and fees.
- Multiple credit cards. If you keep multiple credit cards in your wallet to reap the best rewards, you can have trouble keeping them straight. But you can link Debitize to multiple credit cards. So you can pull out your best gas rewards card when you pay at the pump and the card that has the best grocery rewards at the grocery store. And Debitize will pay down all the balances for you so that you don’t have to worry about it.
- Keep your credit utilization low. Running all of your monthly spending through a credit card is a great way to get more rewards and protections. But you never know when the credit card company is going to send its report to the credit bureaus. So if you let your balance creep up, even if you pay it off in full when you get your bill, you could show a high debt-to-credit ratio on your credit report, which isn’t good for your credit score.
- Easy to use. Once you get it set up, Debitize is very easy to use. And you don’t even have to log into your credit card accounts each month to pay your bills.
While there doesn’t seem to be another product quite like Debitize, you do have other money management options. If a free budget tool is what you’re looking for, then you’ll want to look into Mint. Quicken is another popular option and offers bill pay with their Premier and Home Business Plans but you will have to pay an annual fee for it. To compare the two, you’ll want to refer to our Quicken vs. Mint review.
Another freebie, and one of our favorite financial dashboards, is Personal Capital. They offer budgeting, retirement planning, net worth tracking, and the ability to see all of your accounts and investments in one place. It’s a valuable resource to get a big picture view of your financial health and it’s free!
Debitize is a great option for those who already have good rewards credit cards and good spending and savings habits. It will just make the process of paying off your credit cards in full each month even easier.
If you are not completely in control with your spending, consider sticking to a budget for a while before using an app like Debitize. Otherwise you could still spend more on your credit cards than you can afford to cover from your checking account, which defeats the purpose.
Debitize is especially great if you have a wallet full of credit cards that you use for different purposes. This is the best way to make the most of your rewards. But it can be hard to keep track and annoying to pay all of those separate credit card bills each month. With Debitize, the work is all done for you. You can pay off your credit cards as you use them without the hassle. And that’s a pretty great deal!
In short, Debitize is a great idea. It could still have room to improve, especially in the amount of time it takes for a transaction to process. Because of this time lag, it’s important to keep tabs on how much you’re spending so that your checking account doesn’t get too low. With that said, if you do have a good handle on your spending, Debitize is a great option for making the most of your everyday purchases without going into credit card debt.Topics: Reviews • Smart Spending