As we are all dealing with the disruptions of the COVID-19 coronavirus pandemic, many areas of our society are making efforts to try to get back to what our lives were like before 2020. One key area that is trying to get closer to normal is higher education, as our thousands of U.S. colleges and universities have had to closely manage how to teach students if a classroom is now a potential source of coronavirus infection. Some schools have fully shifted to online, virtual learning, while others have gone back to traditional, in-person, campus classes, and other colleges and universities created a mix of physical classroom and virtual teaching.
For college students on campus, this may be the first time in their lives where they are entirely responsible for managing their finances, and they will be making important decisions on how they handle their money, purchases, and debt.
How we manage money can be influenced by the tools used to manage it, and two of the fundamental financial tools millions of people use are debit and credit cards. Debit and credit cards have some similarities and some very big differences in their features and how they may be used. For college students, these cards may be their primary purchasing tool, and they are a responsibility to be handled maturely and thoughtfully. Before a student decides what type of card they'll depend on, they need to consider the features of both. Below is a brief guide to how these cards function that highlights how they are alike and unique that may be of interest to students of higher education.
Here are a few points to keep in mind when evaluating a credit or debit card:
Key features of credit cards
- Credit cards can be used to pay for many types of purchases; they access a line of credit issued by a financial institution, which is often a bank or credit union.
- Credit cards may offer better protection than debit cards through warranties and fraud protection and correction, since a card charge may can be cancelled, and the account holder often pays the charge later in the month rather than right away.
- Credit charges may be paid monthly or over longer time periods, but with longer payoff times interest charges are usually added on until the entire payment is satisfied.
- Credit cards may be liable for a variety of fees, such as late-payment fees, and other penalties for violating the terms of card usage that are stated by the card provider.
- There is usually a limit on the total amount of charges that can be made in a month, such as $2,000, $10,000, or more.
- Credit cards may come with additional benefits, such as rewards programs.
- Credit cards may be used as automated teller machine (ATM) cards, but then the cardholder will likely pay interest on the money that's withdrawn, as it's considered a loan.
- Credit cards help build up a credit score and history, which is something to track and manage for many years.
- Credit cards may include many additional security and spending benefits.
- A credit card provider has financial criteria that must be met by the applicant before it will issue a card to them. College students may not be able to meet these requirements independently, so they may be issued a credit card attached to a family member's (such as a parent's) primary account. The primary account holder is then responsible for paying any charges on the account, both their own or those made by the student attached to the account.
Key features of debit cards
- Debit cards can also be used to pay for many types of purchases; they take out money directly from your savings or checking account.
- Debit cards may not have all the same consumer protections as credit cards, since a debit card payment immediately withdraws funds from a savings or checking account. Essentially, a debit card is like using cash.
- The limit for withdrawing funds generally is the total amount of money in the account.
- Debit cards may also come with additional benefits, such as rewards programs, but are somewhat limited compared to credit cards.
- Debit cards can also be used as ATM cards, but there are no interest charges, since the money is being withdrawn from the debit cardholder's account.
- Debit cards do not contribute to or affect a credit score, since they do not use credit.
- A debit card may be easier to get than a credit card, since it’s linked to money that is already in an account.
Which type of card is best?
The features listed above for the two types of cards are only partial; they don’t include every possible feature or benefit available, only a few important ones. With significant differences between each type of card, a potential cardholder must review and decide what features they value most. A few card differences worth highlighting are that the requirements for getting a credit card are more stringent than for a debit card, but the credit card does build up a credit score history. Alternatively, debit cards require budgeting discipline because the payment is immediate; the user always needs to know their balance before making a purchase. Overall, a user's card preference will depend on their needs, financial management style, and spending habits. Some interesting spending card details may be viewed at the U.S. Federal Trade Commission's (FTC) site, where it discusses credit, debit, and charge cards, and it provides useful information on using a credit card.
Are college deals good deals?
College bookstores, online retailers, streaming music and other services will offer limited-time or ongoing discounts to college students, both when school begins and throughout the year. These offers usually bombard students via online ads, emails, and, maybe, through the U.S. mail. Usually the student must register with the retailer or service and provide their school email address to get the price deals. Some college bookstores seem to have endless sales, with the types of goods with special prices changing every week; popular categories for special deal pricing often include school-branded clothing or well-known software. These product or service providers promise enticing, seemingly big discounts for students, but are these special prices really a good deal?
Well, these deals might be competitive or superior to prices from other sellers, but—as with college courses—it's a very good idea to do the related homework, and do it thoroughly. So, for college students, here's a little bit of discount deal homework to complete:
- Check various online retailers, including auction sites, for their prices and compare them with special college student offers.
- Make certain to compare the exact same item, including models, versions, and specifications—these details are especially important for electronics, such as laptop computers, cellphones, smartwatches, wireless earbuds, or noise-cancelling headphones.
- Read the fine print—when does the deal expire, what happens after it expires, are there exceptions to the deal, and, if the deal is accepted, is there the possibility of being locked into a contract or conditions that are not favorable over the course of the service?
- How quickly is the item needed? With a college store, the most important benefit it offers may be time rather than a competitive cost—if a student needs something immediately, the college bookstore is likely nearby and could have what they need right now or in a few days, and probably will not charge for shipping.
For students trying to save money and maximize a budget, taking the time to do the homework on deals is perhaps the best deal they can get.