Debit vs credit card
Training 325 minutesdebit vs credit
You are 27 and manage projects at a small studio. The bank approved your first credit card: $3,000 limit, 25% APR, up to 50 days interest-free. A close friend has been paying off the same kind of card for two years.
Training goal: Use the credit card as a tool, not a wallet
▶ Play this trainingSituation
1. You are booking a $380 hotel on an unfamiliar site. Which card?
- Credit, and pay it off within the grace period
- Debit: it is my own money
- A transfer to the hotel owner's card
2. The statement arrives: $640, minimum payment $25. You have $1,500 in the account and no big bills ahead.
- Pay the minimum, the rest later
- Pay half
- Pay the full balance by the due date
3. The market takes cash only. There is an ATM nearby and you have both cards.
- Withdraw $200 on the credit card, bigger limit
- Withdraw $200 on the debit card
- Send the seller a transfer from the credit card
4. A year later the bank offers to raise your limit to $10,000.
- Accept, but keep spending the same
- Accept and buy a $2,400 laptop
- Accept and take some out for a vacation
5. You lose your wallet with both cards.
- Wait till morning, maybe it turns up
- Freeze only the credit card, it matters more
- Freeze both cards in the app right now
What you will learn
- A credit card pays off only if you clear the full balance in the grace period.
- Online and travel: credit. Cash: debit.
- A limit is not income. Keep spending under 30% of it.
Your real-life step
Set credit card autopay to the full statement balance, not the minimum.
Questions and answers
What is the difference between a debit and a credit card?
A debit card spends your own money. A credit card spends the bank's money, which you repay or pay interest on.
What is a credit card grace period?
It is a window, often up to 50 to 55 days, with no interest if you repay the full balance on time.
Should I withdraw cash from a credit card?
You can, but it is costly: usually a 3 to 5% fee plus interest from day one. Use debit for cash.
More trainings in this module
Numbers are illustrative. A game, not financial advice.