Debit Card Vs. Credit Card: Which Is Best For a College Student?

College students often need their own bank accounts or credit cards even though they don’t work full-time. Students can benefit from becoming bank account holders or cardholders, particularly if they’re getting loans or financial aid. That’s why many institutions offer accounts for them.

How college students manage their finances can be affected by the tools they have. And the two financial tools used by many are credit and debit cards. Although these tools may share some similarities, there are a few differences in their features and how they can be used and their features.

When deciding which is best for a college student, consider the following points.

Key Features of Debit Cards

You can use a debit card to pay for any purchases. The money used is taken out directly from your checking or savings account. Because the fund in debit cards is money from the bank, you can instantly withdraw money from your account.

Additionally, the limit for fund withdrawals is generally the total amount of cash in your checking or savings account. Debit cards might also come with added perks, like a rewards program. However, they are quite limited compared to credit cards.

Keep in mind that debit cards don’t affect credit scores because they don’t use credit at all. So, if your goal is to build a good credit score, a debit card might not be for you. Nevertheless, a debit card is more convenient than a credit card because you have access to your own money when you need it.

It allows you to pay for purchases almost anywhere quickly, plus you can pay your bills directly from your account. When choosing a debit card, consider the following:

  • Mobile Banking. A financial institution that provides a mobile app and online checking account access will allow you to check your balances when it’s convenient. Also, you can make deposits with a mobile banking app.
  • Fees. Be sure to look past the sales pitch to know if there are any hidden fees, like when you’re going over the limit. It’d be best if you could find a bank that offers debit cards with no monthly fees.

Key Features of Credit Cards

Like debit cards, you can use a credit card to pay for any expenses. The money used to pay for your purchases comes from a credit union or a bank that provided the card. Unlike debit cards, credit cards offer better consumer protection through fraud protection and warranties.

What’s more, charges can be paid over longer periods or monthly. However, if you choose to pay your credit charges for more extended periods, the interest rates can accumulate. On top of that, credit cards are liable for various fees like penalties for failing to conform to the terms of credit card usage and late payment fees.

Additionally, there's a limit on the amount you can charge to the card. Be sure to know how to avoid overspending. Another thing, before you can acquire a credit card, there are financial criteria set by the card provider you must qualify for.

College students might not meet these provisions independently. As such, students may be issued a card attached to their parent’s primary account. The main account holder is then liable for paying any charges on both accounts.

When choosing a credit card, consider the following:

  • Annual Fee. Make sure that the card won’t charge an annual fee on it.
  • Foreign Transaction Fees. Some cards charge foreign transaction fees on purchases made in other currencies. With that said, if you decide to study abroad, get a credit card that won’t charge this fee.

Which Is Best for College Students?

With major differences between a debit card and a credit card, a possible cardholder should double-check each feature and decide what they value most. For example, getting a credit card is more complicated than a debit card. Even so, credit cards do build your credit history.

Building your credit history early on is vital to have a smoother experience applying for loans and mortgages, enjoy an easier time renting an apartment, and access better insurance rates after graduating. Still, debit cards instill essential budgeting discipline because the cardholder can see the amount left in their account before purchasing an item.

All in all, a potential cardholder’s preference will depend on their spending habits, money management style, and their needs.

The Bottom Line

As parents, you can financially prepare your kids by responsibly teaching them how to use a debit card or credit card. Teach them how to use the cards, check the balances, make deposits and withdrawals, and what it means to overdraft. Also, have conversations with your kids about spending and debt. In that way, they can avoid making some common missteps that could lead them down the path of racking up more debt.