Debit & Credit Cards: What’s the difference?
Written By: Cooper Young
As us juniors and seniors slowly integrate ourselves into the adult world, we find ourselves questioning aspects of adulthood that we were oblivious to. Whether it's a financial or social entity that we just can’t understand-there is always something that has us perplexed as we slowly adjust to accountability for ourselves. One thing that really stumbled me, and still has me confused on occasion, is debit and credit cards. What’s the difference between the two? Why do I need both? How are there different types of money? What is a credit score? Although these questions can be daunting and confusing, I can assure you that debit and credit are nowhere near as complicated as they might seem-they’re just poorly explained to us young adults.
ion fees or hidden issues. You get out what you put in. People might use their debit card to purchase something small and routine like gas or get money from an ATM. Medium one time purchases such as a doctors appointment or restaurants are great examples of what most people do(and should) use their debit cards for. Spenders rarely make big purchases on their debit cards, and most banks have limitations on how much you can purchase, usually around $1,000-$3,000 daily. These limits are to not only protect your money, but the bank as well. A spending limit can stop the damage a thief can do to the balance-ultimately saving your’s and the bank's cash. In its simplest form, a debit card is basically a placeholder for your cash with a few limitations on how much you can use.
Now credit. Most people my age are confused on how to use a credit card and what its real purpose is. Using a credit card is similar to taking out a loan. You are taking out a loan to pay for something that you want or need. Later down the road, you are then responsible for paying back that money. At the end of each month or billing period, you will receive a statement from your bank with your total amount due, your minimum balance due, and the due date for your payments. If you pay your total amount on or before the due date, you are exempt from paying any interest. However, if you pay less than the total amount before the due date then you will have to pay interest on the remaining balance. This is how banks make their money. The average credit card interest rate is around 17-20%, so paying off your amount in time is a good idea. Despite all of the negativity and obligation, credit cards have lots of benefits. Credit cards allow you to pay for entities that you might currently have the money for. Think of a family living paycheck to paycheck, a credit card would allow them to purchase necessities before their next amount came in. Credit cards also are a safe way to make purchases online with protection from theft. If fraud is noticed, you can easily cancel those purchases with no damage to your savings traditionally. There are some complicated instances where that isn’t the case, but that would only screw readers up by explaining them. A credit card is simply a miniature loan that you take out with each purchase, except the only interest you pay is at fault with your own neglect.
vidual who opens a credit card. This credit score is basically an assessment of how well and responsible you are with credit. Do you pay your bills on time? Do you not overspend? All factors that build towards your credit score. As your credit score increases, your likelihood of you receiving that loan increases. Nearly everyone takes out loans, whether it be student loans, house loans, car loans, or any other loan you can think of. Your approval for a loan, and your interest rate, are determined by your credit score. Although not really useful for us now, credit scores are very applicable as you start making large purchases as an adult.
Works Cited
moneyunder30.Com, www.moneyunder30.com/debit-card-daily-spending-limit.
CBS News. “5 Purchases You Should Never Put on a Debit Card.” CBS News, CBS Interactive, 2 Nov. 2016, www.cbsnews.com/media/5-purchases-you-should-never-put-on-a-debit-card/.
Fontinelle, Amy. “10 Reasons to Use Your Credit Card.” Investopedia, Investopedia, 10 Oct. 2020, www.investopedia.com/articles/pf/10/credit-card-debit-card.asp.
“What Is a Credit Score?” Equifax, www.equifax.com/personal/education/credit/score/what-is-a-credit-score/.
How can a person decide between getting a debit card or credit card? And is it a good option for someone to get both a debit card and credit card if they can't decide between getting one or the other.
ReplyDeleteSomeone can decide which one they want based upon how old they are and what kind of regular purchases you're making. If you're young, irresponsible, and not planning on any big purchases or loans in the future then a credit card could wait and a debit card would probably be the best way. Now, if you 100% know you'll be making a big purchase or taking out a loan in the somewhat near future, a credit card would be a good option to start building your score and reputation. Also, if you make a lot of online purchases and are very fearful of monetary fraud, a credit card would also be the choice for you.
DeleteI actually didn't know thats what a debit card was, despite the fact i had one I never really thought about the fact it just uses money in your account and nothing else, I always thought there was something more to it.
ReplyDeleteWhy is the credit card interest rate so darn high? Is that interest rate annual, or monthly? Do you think that interest rates that are that high could be detrimental to some Americans who may not have received the same financial education as some of us have recieved?
ReplyDeleteIn the picture provided for the credit score, what do the numbers mean on each category mean? What evaluates what number you have? Is it the amount of money you owe, or don't owe? or is it more like just a rating based on how well you did for the month? I think everything else was well explained, I was confused about what the difference between debit and credit is, or even what A credit score is. Also one more question, is there some sort of repercussion for having a credit score be too low?
ReplyDeleteI've never actually learned what a credit card does before. I understand why developing a credit score is important but what if you never use a credit card or even have one? Does that make your credit score low, or do you just not have one? and what does that mean for bankers who are overseeing your loan?
ReplyDeleteI never knew what credit score did for you and why it was so important to have a good score. Now I understand why this is so important because I see myself taking a loan or two in the future.Do you see yourself getting a credit card in the future to build up your score.
ReplyDeleteAs I was reading I was starting to question why anyone would use a credit card over a debit card if they are going to pay back the money at the end of the month. I knew that there were benefits to credit cards, but I didn't quite know what they were. However, I now understand the importance of building up a credit score for loans. How early is best to start building a credit score? And why do people have multiple credit cards? Do some companies offer different benefits than others?
ReplyDeleteTo answer your questions about why some people have multiple credit cards, there are multiple reasons. One is security. If you have multiple credit cards, and one gets stolen, you can call you bank to stop giving money to that card that got stolen, but still have other cards to buy things with.
DeleteThe second reason is like you asked, some companies give different benefits. I know there are a few retail stores that have their own credit cards you can sign up for that give special rewards if you shop with that card. Other cards can give cash back on every purchase, but aren't accepted at every store, so having one that gives less benefit but that you can use everywhere, and one that gives a better benefit but is more limited in its use is a good strategy.
"Think of a family living paycheck to paycheck, a credit card would allow them to purchase necessities before their next amount came in."
ReplyDeleteThis is exactly what I think of credit cards as. They bring future money into the present. Don't spend money you don't have with debit cards, but don't spend money you WON'T have with credit cards.
It is saddening to think about people living paycheck to paycheck who do have to use credit cards, because sometimes they use credit cards, but then don't have the money to pay it off, putting them further in debt. This just further shows how American systems do not benefit the poor.
DeleteThis comment has been removed by the author.
ReplyDeleteI haven't learned about credit cards before but i do know that you don't need a credit card to build credit score because I do not own a credit card but i am still building my credit from paying off my car payments and insurance every month. this information was very useful!
ReplyDeleteThis post was very interesting to read as it gives me a much larger idea of what each of them are used for. If we are asking about how they work and which ones are more beneficial, which method would you recommend? I noticed that you stated in the article that if we are purchasing dinner or something from a store, debit transactions are the go to, however what if we are purchasing something to a larger scale? Like cars, houses, and even medicine. Are you able to use debit and credit the same? Are bank loans similar to credit cards and do they bring fees and interest rates like credit cards?
ReplyDelete-Noah Douglas
I just have one question for this. And that question is when should someone get a credit card to start building their credit score? Also When should you use a credit card like for what kinds of purchases would you use it for. Also another question is how would you start to build your credit would you start with small purchases or would you just use it only on big purchases. Another this is what kind of credit score would you want/ are looking to get to? Is it worth pulling out "loan" a lot with the credit score.
ReplyDeletePeople can open up and close several credit cards in their lives, so how does that affect credit score and does it affect people with a worse credit score more than someone with a good credit score? Or, could it be that people with a bad credit score have a harder time to open up a new credit card?
ReplyDeleteWhen I was a kid, I always thought that the idea of credit cards are dumb-- why spend money that you don't have, or at least have the chance to do so? This writing shows that credit cards can actually be quite beneficial, for purchases, but I still think there are some downsides. As an example, some people have no self-control and end up spending way too much money with their credit card, then end up in debt that only stacks up higher and higher as interest builds. Without these people, the bank likely wouldn't survive. Overall, I think that I'm going to stick to using a debit card more often, other than for online purchases, as those can easily be forged and its nice to have that extra security and other benefits. I probably should eventually get a credit card, though, as a good credit score is nice to have. Overall, it's quite interesting to think about the pros and cons of both cards, but I think that the debit card is better overall, and lowers the chance that you'll accidentally slip into debt if you don't have much money.
ReplyDeleteI understand that it is necessary to build credit although, I do still question things. Who determines it? How are the decisions I make quantifiable in this way? Why is one action bad or good or better than another? Because of that, is this a reliable system?
ReplyDeleteIt's interesting that people are struggling to survive so much that they need to take out a "loan" for groceries in the form of their credit card. It is also insane that people who are struggling to pay off their debt now have higher interest to make it even harder, instead of trying to help them. Sometimes it seems like banks' main focus is profit. It's a good thing to understand these topics as a teenager, because I can't imagine being an adult and not knowing the difference between debit and credit cards, or how it affects me.
ReplyDeleteIs there a more impactful/damaging difference between debit card fraud and credit card fraud? They are much better protected now than they were in the past with how secure the internet and the banks are now, but which one would cause the most harm if it went unnoticed?
ReplyDeleteDid you notice different rates of interest between banks on their credit cards? I also am curious as to if Credit Unions have a lower interest rate than traditional banks? Either way I thought that this helped me to understand much more about my own credit card, and the importance of paying back what I owe on it right away.
ReplyDeleteOne more question that I had is do you think anyone would be able to live without having a credit card and just using cash and a debit card, then you would not have to worry about a credit score.
This was super helpful and easy to understand. but is one card better than the other? or is it best for you to have both? Also how do you go about getting them?
ReplyDeleteI know how a debit card works and kind of understood how a credit card works, but do you absolutely need a credit card? What if you live very comfortably and a debit card is just easier. I know a credit card can be safer as you mentioned in the post, but I just see a debit cards being easier to use. Instead of having to worry about bills at the end of the month. Also why are the numbers on the diagram amount the credit score those numbers? When a credit score was created did they just choose those numbers or do they mean something else?
ReplyDeleteI wonder if something should be done to banks as a result of this malicious business practice. The high interest rates are extremely dangerous, especially for those that forget or those that spend more than they think they can pay back. Maybe for those who aren't financially aware should only be able to use a debit card.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteI guess I know the difference between credit and debit cards now
ReplyDeleteI never compared credit card spending to taking out a loan. I think that this was a really good example of how credit cards work. When writing this article, did you find that some credit card companies allow you to create a better credit score than others? Also, do you think that it would be reasonable to live without a credit card and only purchase items using your debit card or cash?
ReplyDeleteOne thing I noticed is the extremely high interest rate attached to credit cards (17-20%). This is very, very high, and I can see why so many people fall into credit card debt. This is why it is important to pay your credit card bills on time so you ensure you're not just handing the bank money. Keeping in this good practice will also help maintain a good credit score and allow you to hopefully receive future loans. Moral of the story is: credit cards are powerful tools. Use them wisely and remember to pay your bills.
ReplyDeleteThought this was a very thorough blog that enhanced my knowledge of these two cards. From your blog I got to see the pros and cons for each of the cars, but I thought credit cards were specifically interesting. One thing I gained from your writing is that credit cards have a little more risk that debit cards because it isn’t your money. With a debit card the money is coming out of your account and pocket, credit cards are the banks money that you will have to pay back. With that comes a lot more responsibility making sure you are able to pay that amount back on time for no interest rates. Great Job, thought you did an outstanding job explaining why you would use both cards!
ReplyDeleteThank you for explaining what credit cards and credit are! I've always wondered how you gain credit, and what kind of purchases I would be using a credit card for. Comparing credit cards to taking out mini loans is a great way to explain them. Something that shocked me about your article is the 17-20% interest rates. That seems very scary and can make people wary of using a credit card. This is a good example of opportunity cost, do you take the risk and assume you will have money later to pay your credit card bill? Can you trust yourself to pay off that bill?
ReplyDeleteFirstly, this topic is extremely relevant to all young adults, as once an individual gets a part-time job, as early as 14, they are introduced to the world of debit and credit. However, there is additional information that could be included to further explain these forms of payment. Firstly, how does one apply for a credit card, specifically without any credit history? Can debit card purchases be cancelled in the case of suspected fraud, or is that only credit cards? And lastly, the post states, “at the end of each month or billing period, you will receive a statement from your bank with your total amount due, your minimum balance due, and the due date for your payments.” Therefore, since credit card payments occur on a monthly basis, is there a recommended monthly income that you suggest a young adult has before purchasing with a credit card in order to undoubtedly pay on time and maintain a good credit score? Overall, great job with the writing, it was very helpful!
ReplyDeleteI really enjoy how you wrote about something that is super beneficial to everyone reading it, as we are all in high school and this is the time we are becoming more and more independent and getting more freedom just like recieving your own credit or debit card. As I had a basis for what the differences between debit and credit cards were there were a lot of things I didn’t know as I read through your blog post. One example being that “most banks have limitations on how much you can purchase, usually around $1,000-$3,000 daily.” It makes sense knowing this as it is a form of protection for the bank and you own money on your debit card as well. I also didn’t know that if you didn’t pay off your credit card “loan” the money you spend in that term, interest from the bank starts getting added on so you end up having to pay more money. This is good to know as I plan on having a credit card in the future, and having a debit card now. I also knew nothing about credit scores to be honest. I like how you not only touched on the fact that it shows how responsible you are with your money, but also that everyone in their life takes out loans so you need to be mindful of your credit score in your life because banks look at those and the higher your score is, the more likely you are to be granted the permission to take out a loan. I think you picked a perfect topic to cover, especially considering I know myself and a lot of other people didn’t know everything there needed to be known about credit and debit cards and especially credit score.
ReplyDeleteThe transfer from highschool to the real world can be tough. People start to become independent, and have to use their own credit and debit cards. I had a basic background knowledge of what credit and debit cards were, but one thing I did not know about credit cards is that you are basically taking out a loan. Then later in the future you are in charge of paying that loan. I find the whole credit score to be interesting. The more you use the credit card the worse your credit score is. After reading this article, I would definitely choose a debit card over a credit card. I feel like if I had a credit card, I would over spend and bring my credit score way down. I feel like it would do more harm than good. I would prefer to use a debit card and pay with my own money on the spot instead of waiting and paying later.
ReplyDeleteI think that this is an extremely relevant topic for our age group right now. There are so many people that get into the real world and have no idea how some of these things work. This is at no fault of their own, they simply weren't taught this stuff. It's important that we learn about these things now so that we don't make mistakes such as overspending on a credit card without knowing the consequences, and then be stuck paying off massive credit interest for the next few years because we didn't know that that would happen. I didn't know that most banks put limits on debit cards, but I'm glad that they do so that if something was to happen to my account, the damage would be stopped early. I think that it's good that you said that a credit card is basically taking out a loan, because I think that many people don't realize that. The word "loan" is a lot scarier than the word "credit", so people are more inclined to overspend on a credit card. I think most people understand that loans need to be paid back, so equating a credit card to a loan helps with that understanding. Overall, great post!
ReplyDelete^That's Patrick Merkel, I don't know why my name didn't show up
DeleteI thought that the comparison of a credit card to a loan was a very good way to explain the process of using a credit card. I also liked that you described why there are limitations for spending on a debit card. Does debit card theft happen often? If so how often? I thought this was a great way to explain the process of credit score and how to properly build a good credit score.
ReplyDelete