Like many people, do you need a credit card but struggle with the temptation to overspend? The convenience of being able to spend money that you don't currently have is just too great.
Debit cards are a suitable alternative, but they have significant drawbacks – you can't handle emergency expenses that go beyond the funds you have in the bank; you can't use your payment record to build a good credit score; and, you miss out on lucrative rewards programs offered by credit card companies.
Debitize is a new app that attempts to bridge the gap between credit and debit cards by allowing your credit card to function like a debit card from your perspective. All you need is a bank account and a credit card that can be linked to the Debitize app. Most major credit cards work with the app, although there are still a few exceptions.
Debitize effectively acts as your middleman, monitoring your credit card purchases and withdrawing funds from your checking account to cover those purchases. The withdrawals are put into a separate FDIC-insured Debitize account, and the Debitize tool uses those funds to pay your credit card when the bill comes due.
To control spending, you set a minimum balance on the linked checking account. Debitize will not withdraw any funds to pay for items once you hit that limit, preventing you from generating overdraft fees. You will also be notified that your charges have surpassed your account funds, putting you at risk of carrying a credit card balance unless you add more funds.
If you want to continue to exercise your credit capability (for example, paying off a large purchase over time), you can track the payment amount over time and pay if off gradually. You can still spend beyond your limit, as Debitize can't pay off your bill beyond the amount that you have transferred, and you can also tell Debitize to pay a specified portion of your bill in a given month – but that undercuts the basic purpose of Debitize.
With Debitize, you can still retain credit card benefits such as rewards programs and fraud protection without worrying about forgetting a monthly payment. By insuring that you never miss a payment, Debitize also helps you maintain a better credit score. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.
The basic Debitize service is free, but for $3 per month, you can have your card balance paid off weekly. Weekly payments keep balances from accumulating, and therefore raising your credit score by lowering your credit utilization (the amount of your total available credit that is currently in use).
Debitize also plans to make money through the use of more additional features in the future, and may end up earning affiliate fees for targeted offers (for example, signing up for a sponsored credit card). Debitize also claims the right to capitalize on an obvious source of income – the interest that your money generates while sitting in the Debitize account waiting to pay your bill.
What if you run into a financial emergency and need to access the funds transferred into the Debitize account? You can simply request a transfer back into your checking account and work through the emergency, trimming down the balance over time.
If you already control your spending and pay your credit card on time and in full every month, Debitize does not have much to offer you. If you need to maintain a credit line, but have trouble keeping track of your charges or paying your bill regularly, consider it as an option. If you need assistance with financial discipline, or you simply like the convenience of having your monthly credit card payments dealt with automatically, Debitize may be the right financial product for you.
If you want more credit, check out MoneyTips' list of credit card offers.