Lately I’ve been trying to decide whether or not to get a Target Red debit card. As much as I shop at Target, the five percent discount would be nice, but there are some drawbacks. I’m still looking into it and will probably make a post about what I’ve learned once I make my decision.
Anyway, the one con that people cite over and over again is the fact that transactions completed with the card take a few days to post to your account. Even though it’s labeled a “debit” card, it doesn’t behave like the one issued by your bank, which typically posts transactions instantaneously, or at least on the same day. The Target card functions more like a paper check and transactions take a few days to clear.
Unlike a traditional debit card, the Target card does not have access to your bank balance, so it doesn’t know whether you have enough money to cover the debit. You won’t be denied at the register if you have insufficient funds. The transaction will go through and if there’s not enough, your bank will hit you with the overdraft fee. It’s not an insurmountable problem, and it wouldn’t be a problem for me, but a lot of people gripe about it.
So why is this such a huge a con for this card? Because there are apparently a lot of people out there who rely solely on what they can see on the computer screen (either at home or at the ATM) to know their bank balance. They don’t write transactions down anywhere, or keep up with expenses in a program like Quicken. Instead, they rely on the bank to tell them how much they have to spend. When the Target transactions don’t clear immediately, these people incur overdraft fees. Because they saw a balance of, say $200 on the ATM receipt, but forgot about the $250 they spent at Target that week (or didn’t know about the $250 their spouse spent at Target that week), they overdraw their account.
This kind of “bookkeeping” is a recipe for disaster. Relying on your bank to keep track of every expense in real time isn’t a solid financial plan. There are many reasons why a transaction may not post immediately, even those that normally do. The computer system may be down, the transaction may have been routed or coded differently (credit vs. debit, for example), or there could be a glitch somewhere. While many people don’t use a lot of checks anymore, those take longer to clear, so you have to keep track of those. Deposited funds are often held back for a period of time while the bank makes sure the transaction is legitimate. Not everything will post immediately and in real time. You cannot trust the balance you see at the ATM or when you view your account online.
It’s up to you to know how much you’ve spent and to keep up with your current balance. To that end, you need to find a way of bookkeeping that works for you. You can use an old-school paper checkbook register and write everything down. You can use a computer program like Quicken or iBank and enter all of your transactions. You can also use a ledger book or even a simple sheet of notebook paper. Use whatever makes you comfortable and is easy for you.
You have to consistently write down all of your spending and deposits and you have to train anyone else that’s using the account to do the same. Everyone must be aware of what’s in the account. This is particularly important if you don’t keep a large balance in your account and are easily subject to being overdrawn if even one expense isn’t accounted for. The problem isn’t with the Target card, or any other payment method. The problem comes when people trust the computer to tell them their bank balance and don’t do the work themselves.
(Photo courtesy of lemonjenny)