Debit cards vs. credit cards

What you need to know about the difference between credit cards and debit cards

WRITTEN BY: Janelle Vreeland
Debit cards vs. credit cards

College students need to keep their finances in check. It is highly likely that over the course of your four-year enrollment at your college or university, you will receive countless pieces of mail from a handful of companies asking you to sign up for a credit card. You will probably also be approached to open up a debit card. Before committing to any company or opening up any account, you should do your research and determine whether you’re ready for either.

When talking about these plastic forms of money exchange, you should probably be sure to know the differences between them, and the benefits and downsides to both. Chances are you haven’t yet had the opportunity to build up any credit. This is why most banks urge students to open up account and begin to use a debit card first.

A debit card is a plastic card that you can use instead of using actual cash. Not to be confused with a credit card, a debit card directly deducts money from your bank account with each use. With a debit card you are not borrowing money, but spending and depositing your own money electronically.  

Starting with a debit card is a good way of learning how to manage your money and how to keep track of your expenses. According to Jodi Kaus, program director of Powercat Financial Counseling at Kansas State University, students need to acquire money management skills before they can use any credit card.

“We explain that when students are just becoming financially independent it is best to start out by developing good money management skills of recording financial transactions and by following a spending plan,” said Kaus. “So developing good money behaviors with their checking accounts and debit cards is generally an important first step.

Most, if not all, banks today offer online banking so keeping track of where you’re spending your money is an easier task than if you were to use only cash, according to the New York Times.

A credit card is also a plastic card, but instead of deducting money from your own personal account, you are able to spend money that you may not have right now. In a sense, you’re borrowing someone else’s money until you can pay it off with your own. The trouble with credit cards, which is where most college students are caught, is if you spend more money than you have the balance that you owe increases with interest over time.

“Students need to know that by just owning a credit card the propensity to spend is going to be greater,” Kaus said. “So understanding that temptation and knowing one's will power to resist such temptation is critical.”

If you do not pay off your credit card bill right away, interest accumulates and forces you to pay more than what you initially spent. Interest rates vary from credit card to credit card, but tend to be very high for first-time users. Kaus offered an interesting strategy on credit card use for students.

“If they can consider the question of ‘would I go to my bank and take out a high interest loan to purchase this item’ before they pull out their credit card, that is the understanding they need to bring to the proper and improper use of credit,” she said.

On the other side, if you pay the credit card off every month and never accumulate a balance, you don’t have to worry about the interest rate.

“The best way to build good credit is to use your credit card infrequently for small purchases and then to pay it off in full each month,” said Kaus.

Credit cards can also be very beneficial to your credit and your wallet. If you choose to go with a credit card that grants rewards for accumulation of points, you can earn a great deal of money back.

Possibly the most notable and popular benefit for credit cards is the government’s help should you ever get it stolen. If you claim that your credit card was stolen and had fraudulent charges applied to it, The Fair Credit Billing Act states that you have zero-liability for those charges as stated in the New York Times. If your debit card is stolen, you may not be as protected.

Most importantly, when thinking about getting a credit card vs. a debit card, consider how you handle money and how financially experienced you are before you make a decision. If you do not have a steady income or a steady job, then a debit card may be the best option. 

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