Your ability to stick to your budget depends on your ability to regulate your spending. It can be far more challenging to save money for the long or short term, pay off debt, or work towards other financial objectives if you don’t know where your money is going. However, there is another thing you can do to keep your budget on track besides mentally defining a spending limit. You could request that your bank set a debit card spending cap (or a credit card spending limit if you use credit for purchases). Putting a debit card spending limit can help you avoid going over your budget, but it’s crucial to weigh the benefits and drawbacks first.
How Does a Spending Limit on a Debit Card Work?
It’s simple to set a spending restriction on a debit card. First, the bank places a daily limit on the amount you can use your debit card for. Then, the transaction will be denied if you try to purchase after you’ve gone over your daily spending cap. Spending restrictions on debit cards aren’t a novel idea; several significant banks already have them in place. The daily purchase cap, for instance, varies from $5,000 to $10,000 based on your account type and your financial history, according to Citibank. Banks can also impose daily credit card spending caps. Once you reach the daily purchase cap, further transactions will again be denied.
A Debit Card Spending Limit’s Advantages
A spending cap on your credit or debit card might help you avoid overspending, which is its main benefit. That’s advantageous in two ways.
First, you run less risk of going over the budget when you can’t overspend. For instance, you might have an impulsive desire to buy something when in a store. You are compelled to put the brakes on and think twice about the purchase by a spending cap. You might always postpone buying the item for a day if you need it. However, having to wait can cause you to reconsider purchasing it. Secondly, setting a daily spending cap on your debit card can prevent your checking account from going into the red. You might be able to make purchases without a spending cap, but if you go over your checking balance, you risk going into an overdraft. You might then be responsible for paying overdraft or insufficient funds fees, which can quickly mount up.
Is There a Drawback to Setting a Spending Cap on Debit Cards?
Possibly, if you find yourself in a situation where you need to pay for something right now, your bank won’t let you, and you don’t have a backup payment option. Even if you don’t have an emergency, a spending limit could cause problems if you go over it when making a purchase you had budgeted for. Your credit score can suffer if your credit card has a reduced spending limit. Credit utilisation, or the proportion of credit used to total credit available to you, accounts for a portion of your credit score. Your utilisation ratio will be immediately impacted, and your credit score may suffer if your credit card issuer decreases your total limit while keeping your balance the same.
Set Spending Limit on Bank of America Debit Card:
You can, and typically it only requires a phone call or a trip to a branch. Lowering the spending limit on your card shouldn’t incur any fees from your bank, but it’s a good idea to find out upfront.
Make sure the bank is aware of your desire for the lower limit to change permanently. If you don’t, the bank might believe that it’s simply temporary and eventually restore your old debit card spending limit. Remember that it could take up to 48 hours for your new spending cap to take effect.
The following options exist for raising or lowering the daily withdrawal cap at an ATM:
- After logging in, choose Manage Debit/Credit Card from the menu on the Mobile Banking application. To set limits, make sure your debit card is unlocked.
- Once you’ve logged in to Online Banking, go to your account’s Information & Services tab, click Manage card settings, and choose Set daily purchase and ATM withdrawal limitations.
- Speak with customer support
- Go to a financial hub.
You must have funds available in your checking account at the time of transaction when using a debit card. A decline in the transaction or an overdraft fee could happen if that money is not accessible. A credit card can be a choice if you want to pay off a more significant purchase in smaller amounts, but credit cards also have limits. Credit cards also provide balance transfers, which let users move their existing credit card balances to a new, interest-free account to pay off debt more quickly.