Debit, Credit or Prepaid?

What your kid learns

• Same look, different money

  Debit, credit and prepaid cards all look alike. The difference is whose money you’re using, and when.

• Debit: your money now

  A debit card pulls from your checking account. Spend more than you have, and the bank may charge an overdraft fee.

• Credit: a loan

  A credit card borrows money you pay back later. Pay in full each month and there’s usually no interest. If not, interest grows.

• Prepaid: loaded ahead

  A prepaid or teen card has a set amount loaded ahead of time. Grown-ups often control it. When it’s gone, it’s gone. Theft protection is different for each kind of card.

The story: Three friends, three cards

Jade, Alex and Kayla hold up cards that look alike but use different money.

1. Helper: Three friends, three cards. They all look the same. Let’s follow the money.
2. Jade: My debit card pulls from my checking account right away.
3. Alex: A grown-up loaded $30 on my prepaid card. When it’s gone, it stops working.
4. Kayla: Credit cards are different. They borrow the bank’s money, and you pay it back later.
5. Helper: Pay a credit card in full each month, and there’s usually no interest. Pay less, and interest grows.
6. Jade: And if I spend more than my checking has, I could get an overdraft fee.
7. Helper: Debit is mine now. Credit is borrowed. Prepaid is loaded.

The game: Which card is it?

Sort each pretend clue into the card it describes: debit, credit or prepaid.

Games use pretend money and work with taps or a keyboard. Nothing is timed.

New words

debit card

a card that spends money from your checking account

credit card

a card that borrows money you pay back later

prepaid card

a card that spends money loaded onto it ahead of time

overdraft

spending more than your account has, which can bring a fee

Also called: overdraft fee

Questions at the end

• You pay with a debit card. Whose money is it?
• What can happen if you spend more than your checking account has?
• You don’t pay your credit card in full. What grows?
• A prepaid card has $20 loaded. You try to buy a $25 game. What happens?
• Which is true about theft protection?

Remember this

Debit = mine now. Credit = borrowed. Prepaid = loaded.

Talk about it

Which kind of card do you think makes the best first card, and why?

Try it at home: Card detective

1. Ask a grown-up which kinds of cards they use and why. No numbers needed.
2. No cards to look at? Play this lesson’s sorting game again.
3. Name each one: debit, credit or prepaid.

The whole mission works with no account or app.

For grown-ups: live facts

• Lost or stolen card protections by card type

  Source: FTC(opens in a new tab)

• Overdraft fees and checking accounts

  Source: CFPB(opens in a new tab)

School standards

• Grades 6–8
• National Standards for Personal Financial Education: Spending, Managing Risk