Debit Cards vs Credit Cards

Using a Better Money Habits video, this lesson introduces students to the advantages and disadvantages of using debit cards and credit cards.

Using the Better Money Habits video Credit and Debit: Two Very Different Cards , this lesson is designed to introduce students to the advantages and disadvantages of using debit cards and credit cards. This lesson will help students understand the similarities and the differences between the two cards.  It will also help students use the appropriate card when making a purchase in order to avoid unwanted consequences.

This lesson can be used in conjunction with Lesson 15: Cash or Credit in Financial Fitness for Life, Grades 6-8 . The video is approximately 8 minutes, and the estimated time for this activity is one 45-minute class period.

The lesson requires students to develop a Venn Diagram showing the similarities and differences of the features of both cards.  It also provides the opportunity to identify the costs (disadvantages) and the benefits (advantages) of each card.

Financial Fitness for Life  is a comprehensive personal finance curriculum for K-12 students that teaches students how to make thoughtful, well-informed decisions about important aspects of personal finance, such as earning income, spending, saving, borrowing, investing, and managing money. Visit CEE’s Financial Fitness for Life website  for more information on the publication and how to purchase it.

• Describe characteristics of debit and credit cards.
• Identify whether the characteristics are costs or benefits.

• Handout 5.1: Venn Diagram – Costs and Benefits of Debit and Credit Cards
• Handout 5.1: Answers

1. Complete Procedure 1 in Lesson 15: Cash or Credit in Financial Fitness for Life, Grades 6-8 .
2. Ask students if they are familiar with each of these types of payments: cash, check, debit card, gift certificate, and credit card. If not, explain the basic differences. Then, ask students which of them have used each of these payment methods. Record their answers on the board.
3. Ask students if any of them have a debit card? Then ask if they have a credit card? Or, if their household uses debit cards or credit cards.
4. Have students identify the basic characteristics of debit cards and credit cards. Discuss the similarities and the differences between the two cards.
5. If students are not familiar with the differences, offer a few suggestions and explain how important it is to know which card to use when making a purchase.
6. Introduce the video Better Money Habits: Credit and Debit: Two Very Different Cards . Tell students the video will help them understand the similarities and the differences.
7. Show the video. After watching the video, debrief the video using the following questions:
   • What characteristics are the same for both debit and credit cards?
     (Convenient, accepted everywhere, fraud protection, secure, replaces cash, plastic)
   • What are credit card benefits/advantages?
     (Great for emergency situations, may improve credit score, extra perks such as grace periods, reward points, travel insurance, purchase protection)
   • What are credit card costs/disadvantages?
     (Could pay interest, could be hit with late fees, higher interest rates and a lower credit score if miss a payment, pay fees if go over credit limit, may overspend and have unnecessary debt)
   • What are debit card benefits/advantages?
     (Keeps track of what you spend, get cash at ATM, get cash at register if have PIN, won’t pay interest on purchases, protects you from spending money you don’t currently have)
   • What are debit card costs/disadvantages?
     (Card can be declined if not enough money in your account)
   • Which card requires money to be taken automatically out of a checking or savings account?
     (Debit card)
   • Which card requires money to be borrowed and then repaid at a later date?
     (Credit card)

To summarize this lesson, remind students that choosing the best payment plan for their purchases is as important as making a good choice about the goods and services they purchase.  It is also a good opportunity to remind students that all choices have both costs and benefits, so understanding the differences will help them become better decision-makers.

Have students write a “tip sheet” highlighting the costs and benefits of using debit cards and credit cards to share with their parents.

Have students complete Handout 5.1: Venn Diagram – Costs and Benefits of Debit and Credit Cards Part A.  Review the answers, then have students complete Part B.