Student Debit Card Vs Student Credit Card
April 22nd, 2010So little Johnny or Janie is about to go off to college – yes? And you’re worried about how they’ll manage their money (that is to say, your money) and you want to get them some plastic to give them some financial freedom and control and to give yourself some security. So what should you choose then – a student debit card or a student credit card?
Let’s start off by understanding the difference between your basic debit card and credit card.
When we say a student debit card, we mean a prepaid debit cards designed just for students. This is a card that you “load up” with money before hand. You choose the amount and you add it to your card – that simple. Then, you use the card to buy whatever you want because the card is actually a Visa or MasterCard product and so it can be used all over the world just like any other Visa or MasterCard.
You use it to purchase magazines, clothes, airline tickets, groceries, etc. Then, when you’ve spent all the money you loaded onto it, you either forget about it or you load it up with more money and continue as before. The key point to remember here is that you spend only the money you’ve already loaded.
Now a student credit card on the other hand may look identical to the student debit card but here the key point is turned around. With the credit card you spend credit (think of it as money that you haven’t loaded yet). And you simply “load it” later.
So what’s the best choice?
Well, speaking as a parent of a near college age child (and someone who’s weathering the current financial storms) the choice is an easy one. I choose the college student debit card – hands down. Here’s why.
I’ve learned the hard way over my life that it’s best to save for things and then spend the money instead of spending it now and paying for it later. That’s because when you pay for it later you also pay interest charges unless you’re in that tiny, tiny fraction of consumers that actually controls their spending with an iron fist.
Most young people aren’t disciplined enough to control their spending impulses with a credit card. Their emotions will get the better of them and they’ll splurge on something or another and soon end up making minimum payments and pay gobs and gobs of interest charges which effectively make everything you bought with the credit card in the first place much more expensive. And you end up having less financial freedom, not more because you’re tied to the payments and you have less credit to use.
So when it comes to a college-age kid, I think it’s best to have a little discipline built into the card and that’s just what a student prepaid debit card does. It forces youngsters to pay attention to the cost of things and how much money is left in their balance because if they don’t, they’ll find out what it’s like to have their card declined and that’s an unforgettable and unsavory lesson in finance.
Oh, and the other great thing about student debit cards is that you (the parent) can purchase them in the first place and thus be able to keep track of every purchase your child makes even if they go to college in another country. You’ll also be able to load the cards up rather quickly in case of an emergency (from wherever you live) which is something you can never do with a credit card that’s reached its limit.
So in the end, it’s really no contest. Pick the credit card with the most inherent risk and ultimately the least amount of flexibility? Or do you pick the student debit card that has the least amount of risk and the most flexibility? It seems simple to me.