Debit, Credit, and EBT Cards Explained
There sure isn’t a lack of optionality when it comes to banking products today. It can be quite overwhelming when looking over your choices and trying to decipher the technical terms that these companies use. The types of cards they offer aren’t excluded either. While there are many I could cover the three most common are: debit, credit, and EBT cards.
Some, if not most, of you have at least one of these types of cards while others may have a combination. Moreover, you may even have multiples of one type. The purpose of this article is to give you a basic understanding of what each card does and some general benefits and risks. I won’t be diving too deep into each one, specifically credit cards which can be the most confusing, this is just for general knowledge that I think everyone should know. Be on the lookout for a deeper dive down the road.
What’s a Debit Card?
A debit card is the most common type of banking card. If you have a bank account you should have a debit card. If you don’t all it takes is a quick call to your bank to get one sent to you in the mail (you may have to pay a small fee around $10). A debit card is essentially electronic cash because as soon as you swipe your card it comes directly out of your checking account. A debit card also allows you to withdraw cash from an ATM (automated teller machine). Be careful with ATMs though as they can charge fees upwards of $5 for using them if they are not owned by your bank. If you are heavily dependent on cash it may be smart to look into a bank that offers refunds on ATM withdraws. Learn more about banking by checking out an article from earlier this month called Which Bank is Best for You?
Debit cards do have other dangers as well. When you spend more than your account has in it you will most likely be hit with overdraft fees. These can range from $20 to as high as $50 and while $20 may not seem like much when it happens a couple times it will add up. Some banks do offer overdraft protection but you must opt-in for it to take effect. Again, know what your bank offers.
In addition stealing your information, especially online, with a debit card is extremely easy. If you take anything away from this article never use a debit card online. As you’ll find out later it is much less risky to use a credit card.
What’s a Credit Card?
Credit cards are a double edge sword. Personally, I and many others, enjoy the rewards from them and love using them. Others though can get lured into the unlimited freedom of a plastic card. That is until the banks come looking for their money. A credit card is most commonly issued by a bank. It is not uncommon though for a regular business to as well (Kohl’s, Home Depot, Etc.). What they do is give you the ability to buy something and pay it off down the road. Essentially you are borrowing a loan from the bank and if you pay it back within the statement period you pay no interest.
This is why credit cards are dangerous. If you don’t pay the amount in full at the end of the period you will incur insanely highly interest payments. These are usually around 15% annually so you can see how it will quickly add up. The fact of the matter is credit card companies make no money off you if you pay your bill on time.
Credit cards are much safer than debit cards though. Since the money isn’t instantly coming out of your bank account you have time to dispute any charge that may be fraudulent. If you get a card through a major bank this can easily be done in 5 minutes online. Personally, I have had my wallet stolen and the thieves decided to go buy a flat screen tv and Xbox. I reported it immediately and within 24 hours it was taken off my bill.
Don’t let my horror story scare you away from the amazing perks that a credit card can offer. I and many others have used reward points that these cards offer to pay for trips and get random things for free. For instance, my TSA precheck fee of $85 was covered by my credit card company.
I could write an article on the best credit cards for 2018 but NerdWallet.com already did. Honestly, it’s far better than I ever could. If you are looking for one that fits your needs look here.
What’s an EBT Card?
Since we’re on the topic of cards it’s worth mentioning EBT (Electronic Benefit Transfer) cards. For most of you this card won’t apply but for others, it may and that’s fine. An EBT card is a government loaded card that allows people to buy items, mostly food and nonalcoholic beverages. In the late 1990’s these monthly loaded cards replaced food stamps. This allowed states and the federal government to regulate welfare electronically.
To apply for an EBT card you have to go through the Supplemental Nutrition Assistance Program or SNAP for short. Every state has different rules and qualifications so depending on where you are the rules can change. The biggest constraint is the household income level, here’s a sample of the chart.
If you want more information about an EBT card then follow the link to their FAQ page here.
What Do You Need?
For you to take full advantage of the benefits of products that banks offer I believe you need a mix. With that though if you are not in need of an EBT card don’t apply for one. Including that in this article is going to be strictly educational for most. The advantages that even a simple debit card gives you makes it worth having.
If you are like me and all about making your life easier and more efficient and you can do that for free why wouldn’t you?