The lure of credit card rewards, like cash back or travel points, are a big pull for people to use credit cards for their spending. However, these perks can also end up getting you in trouble.
If you aren’t careful, you might spend more than you planned and more than you can afford. When this happens, you have more charges than you can pay off when your credit card statement arrives at the end of the month.
Racking up this high interest credit card debt will quickly outweigh the perks you earn by using your credit card in the first place. This is why many personal finance experts recommend people stop relying on credit cards. They recommend you switch to debit cards or use cash envelopes to get a handle on spending and avoid debt.
But, when you use these methods of payment, you aren’t as able to rewards. Plus, relying solely on debit cards and cash makes it harder to build a good credit score too.
Luckily, these things don’t have to cause you stress or worry anymore. Now you can earn credit cards rewards, build a good credit score, and pay off your credit card bill without worry, all thanks to a new tool called Debitize.
What is Debitize?
Debitize is a company that was created to help make sure you can always pay your credit card bill in full every month. The best part is, it works automatically.
So, after you set it up, it takes the work and the worry out of managing your credit card balance. It does this by making your credit card work like a debit card.
How does it work?
Every time you use your credit card for a new purchase, Debitize automatically debits your checking account for the same amount to fully cover your purchases as you make them.
After the funds are pulled out of your checking account automatically, they are stored in your Debitize account. At the end of each week, or whenever you have it set up, Debitize will apply those funds toward your credit card balance, bringing it back down to zero.
This way your bill is always paid on time and in full.
Setting up Debitize is easy. I was able to set up a new account with Debitize in just a few minutes.
First, you need to sign up on the Debtize website or in the app. The app is currently only available for Iphone, so I wasn’t able to use it on my Android device. But, it was still easy to manage with their mobile-friendly website when I was on the go.
After you create your account, you need to link your checking account and your credit card accounts. You can link multiple credit card accounts if you want Debitize to manage the balance more than one card.
Linking your accounts simply requires signing in with your online banking and credit card credentials. Debitize will send a couple of small test deposits to your checking account to make sure it is linked up properly and they will automatically detect those once they are sent, so you don’t have to remember to go back and verify them yourself. Talk about easy!
After this initial set up is done, you can use your credit card to make purchases like normal and Debitize will pull money from your checking account to cover all of your purchases.
What about checking account overdrafts?
Debitize helps avoid overdrafting your checking account too. You can set a minimum balance in your checking account.
If your checking account is at or below that balance, Debitize won’t withdraw any funds automatically. Plus, they will notify you by email when this occurs and the purchases you made on your credit card will be added to your Uncovered Purchases balance.
What if you have an existing balance or Uncovered Purchases on your credit card?
When I set up my Debitize account, it just so happened that my credit card had a balance on it already because I hadn’t yet paid my monthly bill.
Debitize recognized that my card had a balance and encouraged me to pay it off.
They also have a debt repayment program, called Debt Destroyer, to help you pay off an existing balance and any Uncovered Purchases that may occur when your checking account hits the minimum balance threshold.
Debt Destroyer can help you pay off your credit card debt in three ways:
- You can schedule a one-off payment in Debitize when you have extra money above the checking account minimum threshold.
- You can schedule recurring daily payments to pay it down whenever you have funds available in your checking account above the minimum balance.
- You can make a payment directly to your credit card outside of Debitize and it will recognize the payment and adjust your Uncovered Purchases balance accordingly.
What about returns?
If you return an item that was purchased with your credit card, Debitize will first apply the funds toward your Debt Destroyer balance if you have one. If you don’t have a Debt Destroyer balance, the funds will be applied to future purchase transactions.
For example, if you return an item worth $50 and don’t have a Debt Destroyer balance, Debitize will keep the $50 in your account. Then when you make a purchase of $150, Debitize will only debit your checking account for $100.
How Debitize can help improve your credit score
Besides just helping ease your worry about overspending on credit cards, Debitize can help improve your credit score.
Because Debitize helps you pay your credit card bill on time and in full, your credit score should see a boost over time.
The Debt Destroyer program will also help you improve your credit score as you pay off your debt and lower your credit utilization ratio – the ratio of credit used vs credit available on your card.
Finally, Debitize also has a feature called Credit Optimizer. Credit Optimizer will pay down 1% of your credit line right before your card reports to the credit bureaus, which can also help decrease your utilization ratio and increase your credit score.
Although Debitize wants you to treat your credit card purchases like a debit card, they do allow you some flexibility.
You can cancel withdrawals from your checking account before they happen, or you can transfer funds back into your checking account from your Debitize Reserve Account if you need the money back.
They are also working on a new feature to allow you to easily skip single purchase transactions.
With Debitize, you don’t have to worry about the security of your information. The use bank-level 256-bit encryption, plus they don’t store your bank or credit card credentials in their system after you link your accounts. This does mean you might have to re-connect your accounts from time to time (I did!), but it helps your information stay safe!
You can also unlink accounts at any time you choose.
Finally, Debitize also watches for suspicious activity, just like your bank and credit card do. Debitize will alert you in the app and with an email if they notice anything suspicious in your account.
Who should use Debitize?
Debitize is a great tool to use if you have trouble with overspending and going into debt. It will help you avoid these financial problems, while still being able to earn the credit card rewards you enjoy.
It might take some getting used to. For example, even though I’m credit card debt free because I always pay my balance in full each month, I have gotten used to having that buffer before paying my credit card bill. With Debitize, that buffer is removed because transactions are debited from my account immediately. While that’s not a bad thing (In fact, it’s probably a good practice to be in!), it did take some getting used to.
Debitize is free to use, but they have plans to charge for some features later on. But, the good news is that Debitize doesn’t sell your information to 3rd parties, so you don’t have to worry about spam. Plus, if you sign up with our link, you can get $10 toward your credit card bill!
Debitize is certainly worth a try to help build credit, avoid debt, and still earn top-notch rewards.