What’s the Difference Between a Debit and Credit Card?

What’s the Difference Between a Debit and Credit Card?

BIG Ideas:

  • Though student debit cards and student credit cards offer fast and easy ways to pay for things, they are very different in a variety of ways.
  • Debit cards use money from your bank account, while credit cards use money from a lender.
  • The option that’s best for you depends on your spending patterns and credit history.

Imagine this dream sequence …

You’re on a game show. You’re up a few hundred dollars on your competition with one last category on the big blue board: “Debit v. Credit Card.” The topic doesn’t excite you, but you only have to get a few answers correct to take home the money you need to make your college years a little easier. You know you have to phrase your answers in the form of a question, but at this point, the question is: How much do you really know about the two?

There’s only one way to find out how this dream ends: to test your knowledge by reading about how student debit cards and student credit cards work and which one is right for you.

The BIG difference – where the money comes from

On the surface, student debit cards and student credit cards look a lot alike. They both are issued by banks or lenders, fit comfortably in your wallet, and can be used to make purchases. But don’t let their appearance fool you; they are very different in some key ways, including where the money comes from when you use them.

A student debit card uses YOUR money: It’s linked to your bank account.

  • You can use a debit card to make purchases or get cash at the ATM.
  • Because it uses your money, there’s no need to pass a credit screening to be approved for one.
  • The amount you can spend or access depends on the amount of money you have in your bank account.
  • There are no annual fees or interest rates assessed on debit cards.

A student credit card uses a LENDER’S money.

  • When you use a credit card, you’ll have a grace period to pay back the money you borrow in full to the lender.
  • If you don’t pay the full amount when the grace period ends, you’ll incur interest charges.
  • To get a credit card, you’ll need to have your credit screened.
  • The amount you can spend or access depends on your available credit (the money you haven’t used on the credit line the lender has extended to you).
  • Credit cards come with fees, including annual fees, interest fees, and late fees.

Which student card option is right for you?

Now that you understand the differences, you may have another question: Which card is best for me? The truth is, there are some very good benefits of having both a credit card and a debit card.

Student Debit Card Pros

A debit card is ideal if you:

  • Want an easy way to shop or pay your bills using your own money
  • Use the ATM frequently
  • Don’t have an established credit history
  • Think you may overspend if you have a credit card
  • Seek purchase protection for unauthorized purchases

Student Credit Card Pros:

A credit card is ideal if you:

  • Want to start building a credit history, which can help you qualify for loans
  • Are concerned about fraud and don’t want a card that’s linked to your bank account
  • Want to earn rewards on your purchases
  • Seek purchase protection for unauthorized purchases

Of course, it’s also important to understand the drawbacks that come with each option.

Student Debit Card Cons:

  • You could overdraw your account if you make a purchase for more than you have in your bank account
  • They don’t offer the same rewards as some credit cards
  • Debit cards are linked to your bank account, which could increase the chances of identity theft

Student Credit Card Cons:

  • You could spend more money than you have in your budget
  • Interest fees are high if you carry balances
  • If you want to use it to get cash, you’ll pay high cash advance fees
  • Paying late on your credit card can cost you money and damage your credit

There’s no question that student debit cards and student credit cards are very different. But if you manage your money responsibly, both can be good options to help you take charge of your spending and reach your goals, making you a winner.

Brazos is here to guide you on your financial journey!

For more than 40 years, Brazos Higher Education has been helping college students succeed. As a Texas non-profit, we can offer you BIG savings on various student loans and helpful guidance to ensure you build the financial future you deserve. Contact us today!