Credit cards and Debit Cards, Credit and Debt Financial Literacy Unit FCS: MS 2.2.3

Before we start… Keep names confidential Instead of saying, “My aunt Julie….” Say, “I know someone who…” Share your experiences with the class, but in a respectful manner

Discussion Time How many own a debit or credit card? Do adults you know use credit, debit, both, or neither? What is the difference between a credit card and debit card? Who knows someone who has been in debt? What is the difference between credit and debt?

Debit Card Think of a debit card as a “pay now” type of payment. When the card is used, funds are automatically withdrawn from your account. If there is not enough money in your account, you will not be able to purchase the item (or the bank may charge you a fee)

Debit Card Debit card issued though this institution  Bank Name—Name of bank where the cardholder has an account Debit card issued though this institution A bank is a financial institution. Banks can be small and local, or a chain of nationwide banking institutions.

Debit Card  Computer Chip—New item being phased into cards to increase security Not all cards have these, only newer cards. The chip generates a unique code for each transaction, while magnetic strips only have the same information that can be stolen.

Debit Card  Account Number—Links all purchases made with the card to a designated bank account Every card has a different account number assigned by bank or company. The number is usually encoded on the card, can feel the number raised up. Embossing was a sign that the card was real, now it is not necessary because most transactions are handled electronically.

Debit Card Expiration Date— The debit card is valid and may be used until this date Card is not valid past expiration date. The company either sends the cardholder a new card, or cardholder has to request a new card.

Debit Card  Cardholder’s Name— The cardholder’s full name is written out and displayed. Name of the person that owns the card and has singed the needed paperwork,

Debit Card  Magnetic Strip— When the debit card is swiped, the magnetic strip automatically withdraws funds from the cardholder’s account. Card is activated by swiping it though a device that can read data in the strip.

Debit Card Ensures the person using the card is authorized to do so  Authorized Signature— Sign in the signature box on the back of the debit card to authorize payments Ensures the person using the card is authorized to do so

Debit Card  Verification Number—This three digit code is located on the back of the card in the signature area Helps ensure the card is in the cardholder’s possession when making purchases This is also called a CVV( card verification value)

Debit Card Plastic card that looks like a credit card Electronically connected to a bank account Money is automatically taken from the bank account when purchases are made Requires a PIN (personal identification number) Confirms the user is authorized to access the account

To Use A Debit Card Swipe it through the store machine or put into an ATM Enter the PIN Complete transaction What other places can you use a debit card?

ATM Automated teller machine, or a cash machine Can be used to withdraw cash and make deposits Additional fees may be assessed if the ATM used is not provided by the financial institution sponsoring the card

Pros and Cons - Debit Cards Pros Cons Convenient Small Can be used like a credit card Allows a person to carry less cash Does not allow overspending Can lose track of balance if transactions are not written down Opens checking account up to credit fraud Others can gain access to the account if the card is lost and PIN is known

Credit Card Have the students try and fill in the parts of a credit card before briefly reviewing. Have students answer and explain the different parts.

Credit Card What are other credit card companies?  Company Name—financial company giving cardholder option of borrowing funds What are other credit card companies?

Credit Card  Computer Chip—New item being phased in to cards to increase security

Credit Card  Card Number—Links all purchases made with the card to an account with the card company 1st number usually is the cardholders identification number Visas- start with 4 MasterCard's- start with 5 Discover- start with 6

Credit Card Expiration Date— The credit card is valid and may be used until this date

Credit Card  Cardholder’s Name— The cardholder’s full name is written out and displayed. A card can be made out to an individual, or a business. Why would companies want a credit card specifically for the company? Business owners want to keep separate business expenses from personal expenses.

Credit Card  Magnetic Strip— When the credit card is swiped, the magnetic strip charges cardholders account through the company Cardholder does not pay immediately, but pays when they are billed

Credit Card Ensures the person using the card is authorized to do so  Authorized Signature— Sign in the signature box on the back of the debit card to authorize payments Ensures the person using the card is authorized to do so

Credit Card  Verification Number/CVV (Card Verification Value)- unique 3-4 digit code that provides additional security Online purchases usually ask for you to provide CVC number for a transaction

Using a credit card

Credit Cards Advantages Disadvantages Convenient Useful for emergencies Often required to hold a reservation Purchase expensive items earlier Possibility of receiving bonuses, such as frequent flyer miles and cash rebates Paying interest if balance is kept on card Additional fees may apply if card is not used properly Tempting to overspend Responsible for lost/stolen cards Risk of identity theft

Do Don’t Credit Cards Pay amount charged in full every month Pay payments on time Keep track of charges by keeping receipts Check monthly credit card statement for errors Make late payments Pay only the minimum payment due Go over the credit limit Charge items that can’t be paid off within the month

Credit Vs. Debt Credit: allows people to buy things now, and pay for them later using a lender’s money. Borrow promises to pay back money at a later date Pay amount + interest later Interest: a certain percentage that is owed to the lender for borrowing money Debt is money one person, organization, or government owes to another person

Credit Limit- maximum amount of money that can be charged on the card What is a Credit Card? Plastic card that holds pre-approved credit Purchase items now Pay later Credit Limit- maximum amount of money that can be charged on the card

What would you do with an extra $104? Melissa and Skylar each purchased a plane ticket for $500 using their credit cards that charge 15% APR Paid full amount owed $500 Took 1 month to pay off Paid $0 in interest Total Paid $500 Paid minimum due $50 Took 3 years to pay off Paid $104 in interest Total Paid $604 Melissa Skylar What would you do with an extra $104?

Summary What is a credit card? 1.6.1.G1 Summary What is a credit card? How can you avoid paying interest on a credit card? What is the difference between a credit card and a debit card? Plastic card that holds pre-approved credit Used for the purchase of items now and payment of them later Pay the credit card balance in full every month! Debit card- money is taken from the cardholder’s account Credit card- money is borrowed and paid back later

Debit vs. Credit Card Credit Card Debit Card 1.6.1.G1 Debit vs. Credit Card Credit Card Debit Card Connected to an account that holds cardholder’s money Money is immediately taken out of an account Not connected to an account Money is borrowed and paid back later Debit Card - plastic card that is electronically connected to an account that holds cardholder’s money