It’s happened to all of us. There’s a long line of people watching you swipe your debit card at the grocery store – our purchases are bagged and carted – and the cashier says, “I’m sorry ma’am, it says it’s declined.” If they’re nice, they don’t shout it. You make sure to state loudly that you have plenty of money in your account, and it must be a problem with the debit machine or the bank (which, to be fair, it sometimes is) but whether it’s true or not, you know everyone else in line is silently judging your poor money management skills.
Aside from the rare occasion when there’s a legitimate communication problem between the merchant and the financial institution, most of us can take the blame for at least one or two of these instances, as we’re getting toward the end of the pay period, trying to make those last few pennies stretch. In the interest of saving us all some money and embarrassment, here are some ways to avoid the dreaded “card declined” scenario.
Track Your Spending
This seems like a no-brainer, but if you’re not in the habit of doing it (and you’re not alone, by any stretch of the imagination) it can be a difficult habit to get into. There are multiple ways to track your spending, so find one that’s comfortable for you, but no matter what you’ll have to start training yourself to pay attention to every transaction – little ones add up fast, you know!
In the old days, we kept a checkbook register with our checkbook, and some people still like to use this method. Even though people rarely write checks, keeping a manual register makes it easier for some to remember to write down the transactions as they happen. For those with more of a technological mindset, there are lots of online checkbook registers, including several that can be installed as smart phone apps. That way you can just enter purchases on your phone as you pay, and see your balance updated, even before it posts to your financial institution. Some examples are Clearcheckbook.com, My Check Register, and Balance My Checkbook, but there are others out there.
As I’ve mentioned in the past, there are also some great personal finance management tools out there, like YodleeMoneyCenter.com, Mint.Com and Quicken to help provide a more comprehensive picture of your financial position.
Some people prefer to just pay attention to their online banking balance, which can work for you if you check it regularly and are careful to maintain a comfortable minimum balance to serve as a buffer for unexpected expenses. The main dangers of relying solely on online banking will be discussed in more detail below, but mainly consist of automatically scheduled payments, and delayed posting times.
Don’t Forget Monthly Auto-Debits
Even if you’re in the habit of writing down your expenditures as you make purchases throughout the week, it’s common to be caught by surprise (sometimes over and over) by auto debits. For instance, I seem to never ever remember a $9.99 charge for a video conversion software I use until I get the email thanking me for my payment. That’s not usually a big enough amount to throw me off, but there are many similar charges like Dropbox, Netflix, Hulu, Godaddy, Adobe Creative Cloud and others I have set up to come out of my account automatically. Between all of these, there is probably $90/month that disappears from my account each month without my having to actively spend it.
The point is, make sure you have a schedule of what days these charges will post, and count them mentally among your bills. Whether you use a paper ledger or an electronic one, enter these transactions ahead of time so they don’t surprise you when things get a little tight.
Be Aware of Holds and Processing Times
Often when you swipe your card or make an online purchase, there is a delay in processing times between the purchase and the time it appears in your checking account. Sometimes in online banking the difference between your “available balance” and your “actual balance” will reflect these purchases, but not always, especially in the case of online purchases. I ordered a product earlier in the month, and it didn’t even show up as a pending transaction until well over a week later, even though Greater Nevada does real-time debit processing. Sometimes this is because it has to be charged manually by the merchant, but whatever the reason, my point (again) is to keep a record of transactions. Don’t rely solely on the current balance you can see.
There are also merchants who will place a temporary hold on your account after you’ve made a transaction, usually in an amount greater than you paid. For example if you use your debit card at a gas station, the station has to approve it before they know how much you plan to spend, and whether your account can cover that. In those cases they usually pick a default number that is higher than a typical gas transaction (say $100) and place a hold on that amount in your account until the actual transaction is processed, at which point they release the rest of the funds back to you. What this means is that even though you only spent $40 on gas, there’s an additional $60 that’s not available to you until the hold is released. It’s important to be aware of this possibility so you don’t accidentally spend what you think you have available and end up with an overdraft fee or a declined card.
Place Safeguards on Your Account
When you do use your card and don’t have the funds available, the bank can handle it in a variety of ways: they can either allow the transaction to go through (and charge you a nonsufficient fund fee, causing your account to become overdrawn) or deny the transaction. Neither is ideal, but there are up sides to both. On the one hand, if you are set up to allow transactions and be charged a fee, you have the option in emergency situations of spending the money (even if you don’t have it). In this case, you can set up a savings account or overdraft account (sometimes this is a personal line of credit) to pay any overdraft charges and the balance of the transaction. On the other hand, if you choose to go the other route (which is the default unless you opt in to have the financial institution pay the merchant and charge the fee) you may have the embarrassment of having the card declined, but you won’t have to struggle to pay back overdraft fees to get back in the black.
Live within your means
Of course, this is the most important point. We all make mistakes from time to time, but if you find that this situation is more common than not, you may need to make some adjustments to your budget and possibly your way of life. Fortunately, it’s not impossible to make the shifts that will help you live within your means. There are many, many resources out there to help you. You can ask your bank or credit union what they have available to get you where you need to be (for example at Greater Nevada, we have Financial Education Center to help members educate themselves on financial topics, and navigate a whole bunch of different money matters).