Comparison: Credit Cards vs Debit Cards – Simple Pros and Cons for Kids

Credit Cards vs Debit Cards: A Simple Explanation for Beginners

Comparison: Credit Cards vs Debit Cards for Kids and Teens

This video does a credit card vs debit card comparison in a simple, concise way for kids and beginners. It could be used by kids & teens to learn about the advantages and disadvantages of each, or used as a money & personal finance resource by parents and teachers as part of a Financial Literacy course or K-12 curriculum.

Comparison Credit Cards vs Debit Cards – Simple Pros and Cons for Kids
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Suitable for students from grade levels:

  • Kindergarten
  • Elementary School
  • Middle School
  • High School

The topics covered are:

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Credit vs Debit Card Infographic
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Infographic: Click Here to Download

What are credit and debit cards?

Credit and debit cards are plastic or metal cards that can be used to make purchases in store or online, pay bills, withdraw cash from ATMs, and more.

They are issued by banks, credit unions, and other financial institutions.

What’s the main difference between the two?

When you use a credit card, the card issuer pays the merchant on your behalf up to a certain amount, called the credit limit.

Credit Cards vs Debit Cards Comparison - Main differences
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At the end of each billing cycle you get an account statement which lists all your transactions that month, along with the total amount you owe – which is called the card balance.

If you pay your credit card balance in full every month, you’re not charged any interest. However, if you carry a balance from month to month, you are charged very high interest on your balance.

But when using a debit card, the money goes directly from your checking account to the merchant – there is no loan involved. 

If there’s enough money in the account to cover the purchase, it’ll go through without any problems. However, if there isn’t enough money, one of two things will happen.

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If you have overdraft protection, your bank will allow the transaction to go through by offering a loan to cover the difference, and then charge you an overdraft fee.

If not, your purchase will simply be declined and not go through.

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Are there any other differences?

Most credit cards come with lucrative rewards like cash back or miles. Some debit cards have started offering rewards, but they are not as good as credit card rewards.

Credit cards also offer better fraud protection. If there is a fraudulent transaction or your card is stolen, you won’t be charged for the purchases you didn’t make.

However, since your bank account is tied to a debit card, if the debit card is lost or stolen, the thief can drain your entire bank balance!

Also, credit cards can help build your credit score based on your usage and payment history. Debit cards have no impact on your credit score.

Lastly, while not ideal, credit cards do offer flexibility by allowing you to pay for an emergency and pay it off over time. However, the amount you can spend with a debit card is limited to your bank balance.

Which one should I use?

Credit Cards vs Debit Cards - Which one is right for you
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If you know you’ll be responsible by not overspending and paying off your balance in full every month, then the ability to build good credit, rewards, and fraud protection make credit cards the better choice.

However, if there’s a good chance you’ll end up overspending and will carry a balance, you should definitely avoid credit cards as they are one of the costliest forms of debt.

In this case, it would be better to use a debit card as it’s impossible to get into debt or spend more money than you have.

Credit Cards vs Debit Cards: Old Version

Credit Card vs Debit Card: A Simple Explanation for Kids and Beginners

Is there any difference between a credit card and a debit card?

My friend told me that his credit card is better than my debit card. But is that true? Is there even a difference?

Credit Cards vs Debit Cards for Kids - Advantages and Disadvantages
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Yes, there are a couple of differences.

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Well then, what are they?

First of all, for credit cards, you borrow the money from the bank. But with debit cards, you use your own money to make the purchases or for ATM withdrawals.

And also, with credit cards, you have to pay interest if you don’t make your payments in full for the month, or you don’t make your payments at all. But with debit cards, since the money is coming from your own account, you will not have to pay any interest.

Yay!! But…

Is there a difference in the fees that they charge?

Yes. With credit cards, many of them will have an annual fee.

But with debit cards – most of them do not.

Yay! But…

Are there any other differences?

Yes, there are.

With credit cards – well, at least with most of them – you can earn rewards (points, miles or cash back) that can be redeemed for cash or goodies. But with debit cards, usually you do not earn any points or other form of rewards.

Which is better: a credit card and a debit card?

You talked to me about all the differences, but which is better?

Credit Card vs Debit Card for Kids - Pros and Cons - Which one is better
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Well, if you’re disciplined and you make your monthly payments for the credit card – and make them in full – then credit cards are probably better for you, because you also get free credit and you can get rewards.

But if you don’t think that you’ll be able to make your monthly payment in full, and you don’t think you’re that disciplined, then a debit card is better for you.

Thank you very much for telling me the difference between a credit card and debit card, Wall Street Willy.

You’re welcome, Sooper Cooper. Remember, finance is your friend!

Video Featured in the Below Financial Literacy Course for Kids & Teens

Download Transcript: Ideal for Use by Teachers in their Lesson Plan to Teach Kids & Teens

Podcast: Credit Cards vs Debit Cards

Credit cards vs debit cards
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