more articles

Credit vs. Debit

Every student across the nation heading off to college is presented with the same financial problems. Subsidized student loans, unsubsidized student loans, grants, financial aid, Student Credit Cards, and debit cards are just some of the terms that students are presented with when they prepare financially for college. Sorting through this mess can be a complicated and headache-inducing matter, but this article will help to sort through one of the most pressing problems for potential students: whether to go debit or credit.

There is one big difference between debit and credit: debit purchases remove money that is available in your checking account while credit card purchases are taken out of an allotted credit balance which must be repaid at a later date. Knowing these two things, each has their own advantages and disadvantages.

Debit, to start with, has the advantage of not needing to worry about having to pay back money. When you go debit, you are using money you already have to pay for items. You don't have to worry about grace periods, due dates, and heavy interest and late penalties that are common with using credit cards. In addition, especially recently, more banks are offering rewards with debit card usage, something which has been common with most credit cards for years.

On the flip side, the disadvantages of a debit card is that you are limited in two ways: 1. You have only a certain amount that can be withdrawn using that debit card each day and 2. You only have the money in your checking account to use for purchases, going over this amount will lead to heavy overdraft fees. Also, the rewards mentioned above are still quite pale in comparison to those offered by many credit card companies.

Now, credit cards, mans best friend and worst enemy all packed into one tiny piece of plastic. This card can be a savior or the devil himself, all depending on how responsibly it is used. Credit cards offer very enticing rewards programs for using them and have no limits on how much can be withdrawn each day (in general, and if they do they are still higher than debit card limits) but rather have a cap on how much can be used until it must be paid back. Essentially, it is a “credit balance” that is always available.

On the downside, credit cards have ridiculously high interest rates and fees for late payments. If you can't pay the credit card off in the allotted grace period, you're basically screwed. Credit cards involve going into debt and that debt must be paid off, or it will affect you permanently on your credit scores. This threat of going into debt alone should be enough to scare away those who would have enough in their checking accounts to pay for the desired items in the first place and would encourage them to go with a debit card.

Choosing between a debit and a credit card is all up to the individual and how they plan on using the card. Used responsibly, a credit card can open up many options and can be incredibly useful, but it also carries heavy risks. Each of these choices has their advantages and disadvantages that must be weighed carefully by the potential user prior to going with that choice. If push comes to shove, one could always choose to have both options available.

Top | More Topics

Share This Article

| | | | |