The Product that Turns Your Credit Card into a Debit Card
One way to avoid getting snowed under by a mound of credit card debt is to make sure you pay off your balance in full every month. Another--and very popular--way is to use a debit card. While using a debit card helps you spend only what they earn, there are some drawbacks to using them. The first is that you don't build a credit history, which is essential for being able to obtain auto loans and mortgages--or even better interest rates on them. The second reason is that debit cards generally don't offer rewards like points or miles for spending money, and those rewards can add up in the long run.
However, now there's a product coming to the market that claims it can give you the best aspects of using both credit and debit cards. It's called Debitize, and it's designed to let you spend like you have a debit card, but get the benefits of a credit card.
The online product works with the credit cards you already have. You just link them and your bank account to a Debitize account, and then you use your credit cards as you normally would. Every day, Debitize will check your credit cards to see if you've used them, and then it transfers money from your bank account to your Debitize account to cover the amount of money you've put on your credit cards. When your credit card bill is due, then Debitize will pay it with the money that they've been holding.
Essentially, Debitize is like an escrow account so that you can use your credit cards without going overboard and winding up in massive amounts of debt. On top of that, you get the benefits of building a credit history and improving your credit score, which can help you get better interest rates and lending terms should you want to buy a house or car in the future. If you have a rewards-based credit card, you can also capitalize on earning rewards without getting into a debt trap.
Debitize also won't overdraw your checking account--the company says that it won't draw money that takes your balance to $0. Instead, it will just draw down to the minimum balance. If your account is getting low and you buy something with credit that will take you below your minimum balance, Debitize withdraws only the amount of money that takes you to the minimum, and then it sends you a notification about your low checking account balance, with a warning that you're at risk of starting a balance on your credit card.
While Debitize won't get you into arrears, it also encourages its users to pay their balances off in full each month. That said, it has built-in features that allow you to make big purchases--which makes a credit card a really useful tool--and pay them off over time. You just need to tell Debitize how much to pay each month and track that payment through it.
To keep your money safe, Debitize deposits it with a regulated bank--although its site doesn't say if your money earns interest in that account--and has limitations set on your money so that no one can withdraw it or transfer that money to another account. The money can only move between your checking account, your Debitize account and your credit card. To safeguard your other personal information, Debitize uses 256-bit encryption, automatic logout, ID verification and account alerts if it detects unusual activity.
Debitize says on its website that it's currently still in beta testing, but it's accepting new beta testers.