Living on your own comes with new financial obligations and expenses. As you start becoming more independent, you may be scratching your head trying to figure out the best way to pay for textbooks, furniture, food or anything else you’ll need. Many people grapple with whether a debit card or a credit card is right for them, but before making this decision, it’s important to know the fundamental differences between the two.

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The most basic difference between a debit card and credit card is that a debit card is most likely tied to a bank checking account — as in, the account that paper checks are drawn from — which means that the amount you spend shouldn’t exceed your balance.

A credit card, on the other hand, acts as a loan, and you can spend up to your credit limit — which is the predetermined maximum amount of money you’re allowed to borrow. Likewise, a credit card should be paid in full every month, or else any remaining balance can be subject to interest charges.

Having the flexibility to be able to spend beyond what’s in your bank account might be a safety net for many students. However, it can also be important to make sure that you don’t spend beyond what you’re able to reasonably pay back, as this can lead to an accumulation of debt in addition to your student loans.

Still not sure which card is right for you? Below are some points to consider:

Building Your Credit Score

You’re never too young to start building good credit, and every time you pay off your credit card bills in a timely manner, you are basically paying back a loan, which can, in turn, help raise the score that appears on your credit report. When you graduate, a good credit history may help you land better interest rates for future loans on bigger purchases like homes and vehicles. There are countless other possible benefits to maintaining a good credit score, such as getting approved for renting an apartment, lowering car insurance rates and even getting your own cellphone contract. You can use Discover’s Free Credit Scorecard to find out your credit score and more in just seconds — plus, it’s totally free and doesn’t ding your credit.

Unlike credit cards, debit cards have no bearing on your credit score. Since they are tied directly to your checking account, every time you use a debit card, you are spending cash you already have. This is just one of the many things you have to take into consideration when deciding which type of payment is right for you. However, there is no interest charged or late fees on debit cards since it is not a loan.

Fraud Protection

We live in an age where online fraud can be a problem — but having a credit card helps alleviate that worry. Thanks to the Fair Credit Billing Act, a federal law designed to protect consumers from unauthorized charges and scams, you most likely won’t get stuck with the bill. As long as you alert your credit card of any unauthorized charges, the law states that you cannot be held responsible for more than the first $50 of fraudulent charges.

Debit cards are protected by the Electronic Funds Transfer Act, which requires timely notification of the fraud or debit cardholders may find themselves liable for up to $500 or more in fraudulent charges, says

Overdraft and Late Fees

While credit cards don’t have overdraft fees, debit cards do. Credit cards can have late fees, though, if your minimum monthly payment is not made on time.

Getting acclimated to living on your own is one of the most exciting experiences you’ll ever go through. Managing your finances is a big part of your adult life you’ll have to think about, and the choices you make now can help set you off on the right path. Thankfully, that doesn’t have to be as scary as it sounds when you’re armed with the right knowledge and common sense.

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