Why I’m Switching Back to Debit to Save My Budget from Total Annihilation

When I first moved out on my own, I was literally broke. I had a laptop and a few hundred dollars in my bank account — that’s it. Luckily, I had just gotten a full-time job and was able to live the first month for free by house-sitting at a friend’s house (man, was that a lifesaver!). But still, I was broke as hell.

How I Saved with Debit When I Was Totally Broke

I knew I needed to do whatever I could to save as much money as possible to build up my emergency fund, so I made myself an incredibly strict budget and used debit to buy everything. By using debit, I knew that I could not go over my monthly allowance without risking going into overdraft.

This kind of mental game worked like a charm, and I was able to stick to my budget and save quite a bit of money, even though I was making the lowest salary of my career.

My Insanely Strict Budget

I’ve actually never shared my budget before, but I want to show you how insane my budget was when I was 24 back in 2010.

Budget 2010 Jessica Moorhouse

Just looking at this again kind of blows my mind. I can’t believe I lived on so little, but I was very determined to save and not get into debt.

What isn’t reflected on here is that despite me making only net $24,896.04 at my full-time job (which equals to gross $30,500.08), I did have a side-job as a teleprompter. I made $20/hour at this gig, but the work was never steady. On average, I probably worked one shift every two weeks.

Nonetheless, all that extra money helped me big time in reaching my savings goals. Whatever I made, I put directly into my emergency fund or RRSP. As much as I wanted to spend it, I told myself that it would do me more good longterm if I didn’t touch it. Thank god I listened to myself!

Why I’m Going Back to Debit to Get Back on Track

Fast forward 6 years, and my budgeting game is in a desperate need of an overhaul. Instead of using debit for my personal allowance, for the past few years I’ve been using my credit card. I do this because when I opened up my bank account with my current institution, they said it would cost me $10/month for unlimited debit transactions. Being the cheapskate that I am, I said “Eff that!” and started using my credit card in its place.

I thought this would be the smarter choice because not only would I be saving myself $120/year, I’d also be acquiring points with every purchase. I was wrong.

In theory, it could’ve been the smarter choice. But in reality, my spending started getting out of control. The freedom that a credit card gives you can be dangerous, and you need to be very focused and strict with yourself. I’ve tried a number of things to help me track and curb my spending, but at the end of the day it just wasn’t working for me. So, I’m going back to debit.

If You’re Budgeting Strategy Ain’t Broke, Don’t Fix It

Looking back, I don’t know why I altered my whole budgeting strategy just to save me $10/month. And it didn’t actually save me any money in the end because I started spending more than I’d allowed myself anyway.

So, to get back on track so I can continue to reach my savings goals, I’m going back to debit. I went into my financial institution yesterday and told them “I’m ready. Charge me the damn $10 per month!” And once they set me up with unlimited debits, do you know what they asked me? If I wanted a line of credit…#facepalm.

How do you budget the best? Do you use debit or credit for your daily and/or personal spending? Make sure to join in my Facebook group to join the conversation there too!

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Showing 22 comments
  • Rob

    Well Jess, I still use one credit card (and sometimes a 2nd one if I’m buying using my retired employee discount for purchases at my former employer’s chain stores). I don’t use a debit card except for cash bank withdrawals. I don’t pay credit card service fees. I get cash back reward points every December, which helps pay down my year end holiday charge card expenses. I’ve operated this way since I first started working. It works well for me. I can understand your reasoning for switching back to debit card usage – to help keep within your budget better. I control my expenses vs budget by tracking the details on a daily basis, spending just a few minutes every evening. Oh yes, I also have maintained a LOC all these years, in case of emergencies, never used it except to put down a deposit on a new car once or twice, which I then paid back in full the following month. Different strokes for different folks, eh? 🙂

    • Jessica Moorhouse

      I think that’s awesome Rob, and totally. Budgeting tactics aren’t one size fits all. I tried doing the credit card thing and nope, did not work for me. But I do still use my credit cards for my monthly bills so I’m still getting points in that way. Thanks for the comment Rob!

  • Des @ Half Banked

    Hahaha oh man, our new-grad financial situations were almost identical! From the salaries to the % saved in each account, right down to the “you want to charge me HOW MUCH for unlimited debit transactions? Let me just get a credit card instead.”

    I’ve been inching back towards the debit approach by paying off my credit card from my debit account after *every* transaction (even the Costco trips, which, ouch.) It’s been really helpful to remind myself that until I get paid, no I can’t buy X, Y and Z if I want to avoid living on my credit card float.

    That said, I could easily switch over to debit, since Tangerine doesn’t have any fees on debit transactions – maybe I’ll join you!

    • Jessica Moorhouse

      Haha that’s awesome!

  • Jordann

    Welcome back to the debit band-wagon. I too thought that using a rewards credit card for daily spending was smart, only to find that more often than not, my husband and I would overspend. Not by a lot, just $15 or $20 per week, but it added up!

    Now we use 100% cash for our groceries and entertainment – the things that we are most likely to be tempted to over spend on.

    For household purchases (ex: just bought an emergency first-aid kit for our bug-out bag), transportation costs and utilities, we use our rewards credit card and pay it off from money in our savings.

    Cash is just so much easier. Once it’s gone, it’s gone.

    • Jessica Moorhouse

      Exactly, it’s so much easier to manage with cash/debit in my mind.

  • Katie

    I’ve had to do the same thing. I’ve had to pay off my credit cards twice and have switched to debit both times. Now, it’s all I use. I’m thinking of (once they’re 100% paid off again) putting my routine purchases that I can automate on them and continuing my debit card for everything else. I only owe roughly $400 now, so I’ll make my final transition soon and will probably stick to it. I’m just not responsible enough for my credit cards.

    • Jessica Moorhouse

      Yup, that’s exactly what I’m doing now. I’ve got all my automated bills linked to my credit cards so they get paid on time and I get points, but otherwise my day-to-day spending is on debit so it’s easier for me to track (and not be tempted to overspend so much).

  • Sharon

    Wow! 10 bucks a month on unlimited transactions is eXpensive! I’d just seek a better low cost bank! Are there no transactions accounts with no account keeping fees where you are from?

    • Jessica Moorhouse

      Not with my bank. We used up our chequing account rebate for our joint chequing account, so I’m stuck with $10/month. It sounds like a lot, but if it helps me not overspend by a couple hundred bucks per month, then I’ll gladly pay it!

  • Derek @ MoneyAhoy

    I agree with you – if it ain’t broke then don’t fix it. I have had my “system” for years and it works for me. I do everything in a spreadsheet and track my finances monthly. I put everything on a CC and pay the balance off in full. For some reason, if I walk around with cash I end up spending it all in just a couple of days.

    • Jessica Moorhouse

      Actually I’m the same way. With debit, I’m fine, but if I’ve got cash in my wallet, I just end up spending it. Not sure why, but physical cash and me do not mix.

  • Stephen

    Good luck with the new approach!

    • Jessica Moorhouse

      Thanks Stephen!

  • Stephen Weyman

    I’m a credit card for life guy because I can’t say no to the seemingly endless free travel and cash back. I can definitely see how it causes people to overspend though and I think you made a wise choice. I prefer to just try and save money on as many things in my life as possible, try to earn more money, and then slow down the spending if it seems I am living outside of my means.

    I’m wondering what’s holding you back from switching to a virtual no-fee bank though or putting aside the minimum deposit to waive your bank fees? I’ve been virtual banking for more than a decade and I can count on one hand the number of times I’ve really wished I had a teller. No reason you can’t bank at two banks either for those rare times.

    If you’re stuck on a full service bank, I did a post on BMO’s new banking plan for couples called PlanShare. You get up to 20 joint or individual accounts all for one plan fee which can be waived with a $3,5000 minimum balance. If I didn’t have no-fee banking set up already, I’d probably do that:

  • Frank Facts

    There’s some disadvantage to using debit, though. Most importantly, if your card gets lost/stolen/fraud, it’s much harder to get your money back — with a debit card, the money is automatically transferred from your account to the vendor, but with credit there’s a delay. Some banks have protections for debit too, but it’s often much harder. Just a thought! I exclusively use credit, and I use Mint on the side for budgeting. Works for me, but everyone’s different! 🙂

  • Darcy

    I use my credit card for everything to get the extra air miles. I track my spending so to me it’s the same as a debit card. I don’t think it allows me to spend too much at all.

  • Catherine Alford

    It’s funny that they asked you about opening a line of credit right after you signed up for unlimited transactions. That really is a face palm, haha.

  • Vanessa

    Debit is a good tool for keeping debt in check. I’ve found that Scotiabanks rewards debit cards (either Scene Points or the Money Back card) are also great incentives for using debit. Free movies or cash back!

    I used to use my credit card for everything except bills. However, I switched to a $12.95/month checking account to get unlimited transactions because I didn’t realize that transactions also included all the online banking things like paying a bill, transferring funds, etc. So, I might as well use up those transactions!

  • Ramona

    We’ve slacked since daughter’s birth, but it shows. While we still earn very well, we do need to save more, so that we can achieve more of our financial dreams. So, say hello to mr.budget and mrs.track-expenses once again 😀

  • Ricky Finance Manager

    Nice share. I really like the way you’ve saved money. Actually I’m a heavy money spending person. Last couple of years significantly trying to save money but I can’t. Seems like it’s time for me as well to switch back to debit card and hopefully this will work for me.

  • Jenni

    Well done for going back to what you know works!
    I recently realised I didn’t have a proper debt repayment plan in place for my credit cards (despite spending my days telling everyone else to get one, whoops!), and even though I was making repayments every month, there was no system, AND I still kept putting “emergencies” or “I can pay for this later” type stuff on the credit cards, so my debt wasn’t going anywhere. When I finally realised how stupid that was, I sat down, used the snowball method to get a detailed plan in place, and handed over all my credit cards to my boyfriend for safekeeping 😀 It was painful at first, but it’s made me more creative when it comes to finding ways to pay for stuff I want, or to make do with what I already have.

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