Cash or Card?

This is a simple question most high schoolers have heard before. Whether your parents cover the tab or your paying solo, it’s a question we have all heard a few times. Cash is a simple currency, but when it comes to using your card things can get complicated. Often, using a card comes with a follow-up question: Credit or Debit? While most people just group them together, they are actually very different. Let’s break it down.

The first type of card I want to talk about is a debit card. A debit card is a card that is linked to a checking account. The amount of money in the account equals the amount of money you can spend, which means you should always be careful when spending with a debit card, you want to make sure you have budgeted enough money for that purchase. Debit cards are best for if you are: trying to stick to a budget, prevent debt accumulation, or happen to be a teenager whose parents have opened up a checking accounts in your name. Believe it or not, these few groups happen to represent most of America. In fact, in 2022, 60% of all cards in America were debit cards.

The counterpart of the debit card is a bit more complicated. A credit card doesn’t require a bank account with a specific bank but can be acquired by filling out a quick application. Spending with a credit card works differently. First of all, there is a preset spending limit. For every purchase a cardholder makes, they are borrowing money from a bank A.K.A. building a line of credit. This of course means they have to pay it back. The user has at least 21 days, but it can go up to 55 days for some banks, which is called the grace period. If the cardholder does not pay it back within the grace period, they are forced to pay back the money with interest. Although many Americans use credit cards, many do not understand the negative repercussions that can happen with the misuse of that line of credit. Keep an eye out for my blog post on credit scores and their effect on your future.

Watch your wallet!

Arjun Lakireddy