Cards – Debit, Credit, or ATM?

So, you’re 16 and you’re eligible for a Debit Card. Should you get one?

What’s the difference between a Credit and a Debit card?

Well, put it this way:
Credit – Money that’s not yours. You borrow money from the bank via the card and there’s a bill to pay at the end of every month with interest.
Debit – Money that’s yours. You take the money out from YOUR BANK ACCOUNT via the card. No interest. There’s an invoice at the end of the month remind you of what you spent on. It’s basically an ATM card that you can use as a VISA/MasterCard at the same time.

Some banks require a higher age for you to apply for a credit card and at least $3k of income per month. SURELY, if you’re a teenager like me, you can’t qualify. And that’s a good thing. More than [INSERT NUMBER HERE]%* of the people living a modern life has to downgrade their lifestyles due to credit card debts.

*Note: This percentage is constantly increasing. I’m lazy to update this post as and when the percentage changes.

 

So, technically, is the Debit Card really a godsend?

Well, you can say that the Debit Card is a pretend-Credit Card, and most of the time it comes with privileges just like a Credit Card too. Which also means whatever vulnerabilities a credit card has, a debit card has it too.

Take, for example, that you have lost your Credit Card. a person simply has to pick up your card, swipe it till it’s maxed out for the month, and you’ll be billed at the end of every month with that person’s expenses until you cancel your card.

In the case of a debit card, a person can do the same to you, except that the limit is the amount of money in YOUR bank account. If the maximum of a credit card for a month is $2.5k, compare that to your bank account which can possibly house $10k or more worth of savings.

 

Replacing your card if it goes missing

Although you have to pay a fine for cancelling your card and requesting a new one, it is always wise to cancel your card first once you find it missing. Remember: Sacrificing $5 or $10 is WAY cheaper compared to risking $2.5k or $10k.

 

So should I upgrade from ATM to Debit or Credit Card?

Basically, if you are someone who lacks money sense and wants to save money, to be honest, keep your ATM Card at home and use the Passbook to retrieve your money. This helps you to be able to play your expenditure and the passbook notes down every deposit and withdrawal, helping you think twice before splurging here and there on things you’ll regret at the end of the month when your allowance runs out. You can deposit money in the Depositing Machine near the ATM Machines using your passbook after bank closure. If you wish to withdraw money, you’ll have to do it before the bank closes. Such a hassle, isn’t it? It’ll surely rid you of your craving to spend a $30 dress on impulse.

 

What if you really, really need an ATM Card? Well, then get one. If you don’t bring much cash along with you all the time and sometimes by 5 or 6pm when you have to have dinner and you are running short on money, it’s always better to have an ATM Card standing by in your wallet saving you from the emergency. It’s also great when a bunch of friends are going out for a movie in the evening, the queue is freakishly long, the movie you want to watch is selling fast and may be sold out any moment and you can’t afford the time to get everyone to pay for their individual tickets in exact change. Just make sure that you exercise some self control around your ATM Card.

 

If you have learnt some form of responsibility, go ahead and get a Debit Card. If the “special privileges ” advertised for Credit Cards entice you, just note that Debit Cards have the same offers for the same banks too. Just make sure you read through the FAQs of the bank’s website first. Some banks may chage a monthly charge for the use of, or owning, a Debit Card. Just make sure!!! Also, to be really safe, open 2 separate accounts. 1 is for your savings, and 1 is for your expenditure. Basically, your allowance goes into your account linked with the Debit Card and you can deposit your savings at the end of each month to the other account.

Having multiple bank accounts under one name and ID/NRIC is great. The accounts are usually linked to each other. It is possible to set automatic transfers of money from one account to another at a frequency that you can choose.

For example, every month, there is a sum of money that comes from my mom’s account into my spending account (linked with the DBS/POSB Debit Card) at no cost except for the initial request charge. Every month, I can also set a certain amount of money to be transferred from my spending account to my saving account.

A gentle reminder though, if you don’t exactly trust yourself, you can always remove your ATM card access to your saving account and only access it with a passbook. Passbooks can be used to deposit money via the Depositing Machine near the ATM machines outside the banks so it’s easy to deposit money using your passbook, even after the bank closes at 4. IF you MUST withdraw money from that bank account, go to the bank BEFORE it closes and use your passbook to withdraw the money at the counter.

 

And now, here’s the Credit Card. Many banks require you to be at least 21 or 18years of age to apply for a credit card and a varying required monthly income depending on what card you are applying for. Some banks also require a monthly charge for just owning the credit card and purchases have interests that you have to pay too at the end of the month. IF you are a really, really, rich kid, you can ask your parents to get you a Credit Card. But, to be honest, I’m very much against the idea of a credit card and no matter how great the benefits are in the advertisement, you must remember that you still have to pay a certain amount of money before you can enjoy the privileges too. Ah, and always remember the interests.

 

That’s all :)
Disclaimer: I am currently in Singapore using a POSB/DBS Debit Card. If any of the points stated above does not apply to you because of difference in country, banks and even age, I’m sorry, but my main target audience is 16 year olds in Singapore so please don’t bash me telling me what I’m saying is inaccurate.