If you haven't heard, the term FinTech is growing as popular buzzword in the personal finance community and even among mainstream Americans. FinTech is short for Financial Technology, and its term refers to the next generation of software products that are designed to deliver innovative services to help you manage your money.
How FinTech Is Applying to Credit Cards
One of the major problems with credit cards is that it enables users to overspend and incur debt. Certainly, cardholders can monitor their accounts and even set alerts when they reach preset spending thresholds, but these solutions are rudimentary and require constant monitoring.
At the 2016 Financial Bloggers Conference, or FinCon, several entrepreneurs were introducing new apps to help credit card users better manage their spending and avoid debt.
ProActive Automates Budgeting
One of these applications is called ProActive, and it uses a mobile app to simulate one of the more popular ways of budgeting. Some people prefer to enforce their budget goals by putting cash into envelopes and carrying those envelopes around, using cash from various envelopes for different purposes. While this method can be effective, it has several serious drawbacks, including security and convenience.
Instead, fans of this budgeting method can use the ProActive app to create virtual envelopes that they must use each time they use their credit cards. ProActive recognizes transactions from your credit cards and then allows you to choose the category, or envelope, that your funds will come out of. This allows consumers to retain the security and convenience of their credit card while also earning rewards for their spending.
Other features include person to person payments, photo check deposits, and a bill payment system. This app is free for the first 45 days and costs $60 per year afterwards.
Debitize Lets You Combine the Best Features of Debit and Credit Cards
Debitize is another FinTech startup that created an innovative app to help credit card users control their spending and eliminate debt. It's founder realized that debit cards were becoming increasingly popular because cardholders knew that they could never incur debt. But at the same time, debit cards lacked the robust legal protections offered by credit cards, as well as other valuable features like rewards, travel insurance and purchase protection.
Debitize automatically withdraws money from your bank account each day in order to have your credit card mimic the features of a debit card and pays off your statement balance a week before its due date. This system not only eliminates the possibility of interest charges and late payment fees, it can also help your credit score by reducing your credit utilization, which is the second largest component of your credit score. According to Debitize founder Lran Amrany, "We've already seen users increase their credit score 30+ points." There is no charge to use this system.
Credit cards are incredibly powerful financial tools, but it has always been a challenge to use them while sticking to a budget. By harnessing the latest FinTech innovations, credit card users now have additional tools to help them get the most from their credit cards.