By Abigail Huitzil

Last year, I opened my first checking account. I didn’t really think I needed one until I applied for my first job position. Pay day was right around the corner and they weren’t going to give me my paycheck in cash or check. Instead, the company I was working for was very fond of direct deposit, which is the simple process of making electronic payments directly into your bank account.

Crazy, huh? You don’t have to go through the hassle of waiting for the bank to open to cash out your paycheck or worry about losing your cash!

I’m currently in the process of applying for a credit card. It’s kind of a struggle for me right now, since I’m getting ready to go to college and I’m not sure whether or not I need a federal loan. Loans will eventually influence your credit score and for someone who doesn’t have credit history yet, this could greatly damage me in the long run. Having a credit card is not a bad thing at all. You just have to be aware of what you’re getting yourself into.

Both are 16-digit card numbers and have expiration dates. Both have magnetic strips and EMV chips. So what’s the big difference here? Debit cards enable you to spend by using the funds that you have deposited to the bank. On the other hand, credit cards allow you to borrow money from the bank up to a certain limit.

So, what are some of the pros and cons of debit cards? First off, these beautiful cards will prevent you from accumulating unnecessary debt. You’re only using the money that belongs to you, which can force you to stick to your existing budget. Of course, you don’t want to spend all of your money in a flash! Next, debit cards are beginning to offer more fraud protection when it comes to your card being stolen. It is all about immediately reporting the incident in order to avoid being held responsible for the losses. Best of all, debit cards have no annual fee!

You may thinking this sounds too good to be true. What are some of the downfalls, though? Well, I got you covered on this one too. Debit cards don’t usually offer rewards, unless you have a rewards checking account. Also, they don’t help you build your credit. Debit cards are the wrong way to go if you’re looking to earn a 850 credit score! Although there are no annual fees, there may be other fees associated, such as monthly maintenance fees, overdraft fees, and ATM fees.

As you can see, debit cards are an amazing thing to have, but let’s now dive deeper into the good side of credit cards. Again, credit cards help construct your credit history. A credit score usually comes into play when applying for a mortgage or buying a car. You definitely want to have the best score possible in order to be able to have these wonderful things in life! They also have warranty and purchase protection when sketchy activity is detected. Not to mention, they offer more fraud protection than debit cards!

Well, what are the cons? The first one is that too much spending can lead you to a very deep hole: debt. The money that you spend has to be repaid with interest and you are obligated to meet the minimum payment every single month. Also, if you are incapable of paying your bill, this will eventually bring your credit score down, which is a very bad thing. Last but not least, it is important to keep an eye out on your annual percentage rate or APR. This percentage could really eat you up when it comes to paying your balance.

Now you know that credit and debit are both two different worlds. Do you think you’ll be able to handle one or both? I say having at least one at an early age gives you a head start on your finances. It is all about being cautious.