Credit cards and debit cards play an important role in everyone’s life. They have outgrown the use of cash and are considered a worthy replacement; they are safer, more convenient, and easier to carry around, especially for larger purchases.
While it’s more than easy to understand how a credit card or a debit card works, it might be confusing for some younger kids and is definitely a subject worthy to be discussed. So, take your time and explain to your kids the importance of understanding how they function.
As kids grow older, you can start manoeuvring their financial literacy by getting them their own prepaid debit card. There are various tools and pocket money management apps that provide your kids with their very first debit card and let parents have great control over their accounts. This way the kids are safe and can learn about saving, spending, and maybe even working for extra cash, through these management systems.
YounGo Money is one of the safest pocket money management systems and is utterly free. You can simply open an account for your kids at your preferred bank and use YounGo Money to manage it thoroughly.
Pocket money management apps
YounGo Money is loaded with amazing features that make it very easy to manage your kids’ money matters and create a clean atmosphere for you to work on their financial skills.
Set Spending Goals
A financial goal is any plans you have for your money. Without setting some well-optimised goals, you’ll probably keep feeling like all you’re doing is spinning your wheels without making any progress. As simple as it sounds, it is a valuable financial skill that your kids need to learn.
YounGo Money offers you the right tools, built-in within the environment of the app to set spending goals for your children so they can steer off of paths that could lead to financial loss.
Not only don’t kids know how to manage their finances, but also the majority of adults are also fighting to survive the financial world. So, it is more than necessary for parents to be able to monitor their kids’ spending until it is clear they are safe to go without it.
YounGo Money merges both you and your kids’ accounts into one management system where you can easily access everything from one app.
Set Spending Rules
Rules and regulations are what keep the world in one piece! With that explained to your kids, you can use YounGo Money to keep them checked to follow the correct trail.
Differences between a credit card and a debit card
Credit cards and debit cards usually look almost exactly the same. They both have expiration dates, magnetic strips and numbers all over them and both are used to make purchases at stores or online.
The key difference is that debit cards let you spend money by drawing cash from what you have already deposited at the bank; it means that you already have some money at the bank, and you are using the credit card to transfer that money to someone else’s bank account.
While with credit cards, you are constantly borrowing money from the card issuer up to a certain limit; meaning you are spending the money that you don’t have and will have to pay back with an interest to the financial institution that issued the card.
What Is a Credit Card?
Credit cards are issued by a financial institution like a bank and allow the cardholder to borrow money from that institution. Cardholders agree to pay the money back with interest. There are various types of credit cards, which will be covered below.
Standard cards: As mentioned earlier, they simply offer credit that allows users to make purchases.
Premium cards: They also offer perks such as concierge services, access to special events, and more, but they usually have annual fees.
Reward cards: these credit cards offer cashback or other benefits to their users according to how they spend.
Perks of using credit cards
Credit cards can have some advantages over debit cards, and of course some downsides as well.
Credit history: The way you use your credit card is reflected on your credit report. If you spend wisely and have on-time payments, your credit score gradually increases which allows you to borrow even more money and take advantage of some other perks of credit cards.
Fraud protection: As long as the user reports the loss of their credit card in a timely manner, their maximum liability for purchases made after when the card was lost is around £50.
Cons of Using Credit Cards
When there is good stuff to say about something, there are always a few bad ones as well.
Overspending: When you make purchases with a credit card, you are using money that is not yours and therefore needs to be returned. Having different credit cards and racking up high balances can lead to a life loaded with financial debt.
Interest and Fees: Credit cards are also defined as short-term loans since you are spending the bank’s money. Therefore you must pay interest when you pay back the money.
What Is a Debit Card?
A debit card is an alternative way to make purchases without having to use bills and coins. Debit cards are used to withdraw the money that you already have in your bank account. Therefore there is no money borrowed, and no interest is required to be paid.
There are some different types of debit cards that offer different features:
Standard debit cards: The standard ones let you draw money from your own bank account.
Prepaid debit cards: A prepaid debit card allows people to make electronic purchases without having access to a bank account.
Pros of Using Debit Cards
Same as credit cards, there are some upsides and downsides to using debit cards as well.
Avoid debt: The most important advantage these have over credit cards is that they can’t trap you into a financially debt-centred life!
Fraud protection: Some issued by Visa or Mastercard provide you with some of the protection features offered by using credit cards.
Cons of Using Debit Cards
Just like credit cards, when there’s good, there’s also evil!
No rewards: Using a debit card withholds you from earning any points or cash back on purchases.
No credit building: When you’re spending money with a debit card, you don’t have the opportunity to build a credit history.
The bottom line
Credit cards and debit cards look almost identical, but they each represent different features and have their own upsides and downsides. Make sure to teach your kids about the important role they play in our lives.