Credit or debit? Different ways to pay

When you’ve been out shopping with your parent, you might have heard a cashier ask if they want to pay on debit or credit. 

Have you ever looked at your parent’s wallet and wondered why they have so many different cards? How do they decide which ones to use?

Here, we’re going to talk about the difference between debit and credit cards. We’ll also start thinking about when to use each card to help you manage your money and spend responsibly. 

The difference between debit and credit cards

Credit and debit cards can both be used to pay for things without using cash. But they’re not just magic, bottomless money cards! 

Credit and debit cards are both forms of electronic payment that are connected to an account that has a certain amount of money that’s available to spend. When you use the card to pay for something, money comes out of that account.  

Debit cards

A debit card is connected directly to a bank account. When you use a debit card to pay for something, the connection the card has to your bank account means you are using your own money to pay for the item. 

The money comes out of your bank account when you use a debit card, so it’s important to keep track of your spending so you know how much money is left in your bank account.

Credit cards

A credit card does not use money that’s in your bank account. With a credit card, you borrow money from the credit card company or bank to pay for things. 

The credit card provider will give you a set limit of how much money you can borrow. Each month, you have to pay the credit card company back some of what you’ve spent. 

Depending on the credit card company and how much you’ve spent, you also usually have to pay a fee, which is called interest. Interest is an extra portion of money you pay to the credit card company when you borrow money from them. 

If you miss a payment or can’t afford to pay back some of the money you’ve borrowed, the credit card company will usually charge you an extra fee. 

When to use a debit or credit card

Everyone has different ways of deciding when to use their debit or credit card, based on their financial habits. These are just some of the advantages and things to think about when choosing between debit or credit.

With a debit card, you are using your own money, so you don’t have to worry about paying anyone back later or paying interest on the money you’re spending. You just have to make sure to keep track of how much money you’re spending and check your bank account regularly. 

Some debit and credit cards have transaction limits, which means you can only use them a certain amount of times each month. 

If you want to shop online, some places won’t let you use a debit card, which is when it can be useful to have a credit card. 

Credit cards are also an important tool to help you build your credit profile, which becomes important when you’re making bigger purchases (like buying a house or car!). However, you have to make sure you pay your fees back in time – if you can’t afford to pay off your credit card, it can cause financial problems in the future. 

Building smart spending habits

Credit cards are something that becomes more helpful and important when you’re an adult. Debit cards are a useful way to buy things and manage your money, without having to carry cash around with you. 

Your Hero account comes with a SideKick Card, which is the perfect way to get used to using cards to pay for things. Your parents can help you put money on your card and decide where to spend it. With the SideKick app, you can see how much money you have on your card quickly and easily, so you can keep track of your spending and build smart spending habits.