Your First Debit and Credit Card

How debit and credit cards differ, how students can get a first credit card, and how to use cards to build a good credit history without falling into debt.

Cards make payments easy, but they work very differently.

Debit cards

A debit card takes money directly from your bank account. You can only spend what you have. Most students first use debit cards and UPI.

Credit cards

A credit card lets you borrow money up to a limit, to be repaid later.

If you pay the full bill by the due date, you usually pay no interest.
If you pay only part, interest is charged on the rest, often at 36 to 42 percent a year or more.
Late payments bring fees and hurt your credit score.

Getting a first credit card

Students without income may find it hard to get a regular credit card. Options include:

Add-on cards on a parent’s credit card, with limits.
Secured credit cards backed by a fixed deposit: the card limit is usually a large share of the deposit. These are easy to get and help build credit history.
Student cards from some banks for those with some income.

Building a credit history

Your credit score, from bureaus like CIBIL, affects future loans for vehicles, homes and even some job applications. Building a good history early helps.

Use the card for small, planned purchases.
Pay the full amount every month.
Keep spending well below the limit.
Never miss payments.

Warning signs

Paying only the minimum due.
Using cards to cover regular living costs you can’t afford.
EMI offers that encourage buying expensive items.
Cash withdrawals on credit cards, which charge high fees and interest immediately.

The FD-backed card

A college student opens a 20,000 rupee fixed deposit and gets a secured credit card with a limit close to that amount. She uses it for her monthly phone bill and pays in full. By graduation, she has a solid credit score, making it easier to get a regular card and a loan later.

Thinking the minimum due is what you owe

The minimum due only avoids late fees. Interest is charged on the remaining balance at very high rates.

Key takeaways

Debit cards spend your own money; credit cards borrow.
Paying the full credit card bill on time avoids interest.
Secured cards backed by fixed deposits help students build credit.
Never pay just the minimum or withdraw cash on a credit card.