Unit 2: Financial Literacy Lesson 3A: How Do Debit Cards Work?

This lesson introduces citizens to the use of debit cards Lesson Description and how debit card transactions work.

Citizens will be able to: 1. explain how money changes hands when using a Learning Objectives debit card. 2. describe how debit card transactions are processed.

• Transparency 1: The Debit Transaction Materials

1. Ask how many students have seen people buying things with a plastic card. Ask for examples. Procedure 2. Point out that there are many different ways to buy goods and services with plastic cards: credit cards, debit cards, gift cards, and prepaid cards. When citizens come to JA BizTown, they will be able to pay cash, write checks, and use debit cards at different stores. 3. Remind citizens that there are basically two types of money that they will use in JA BizTown: JA BizTown cash and money in the bank (bank account balance). Discuss the following. a. When people use cash the amount of money that they have goes down. b. When people write checks, the amount of money that they have in their bank account goes down. c. When people use debit cards, the amount of money that they have in their bank account goes down. 4. Explain that a debit card allows holders to buy goods and services with funds that are deducted immediately from their checking or savings account. A debit card is basically an “e-check,” and the bank finds out faster that a customer has spent money than when a check is written.

5. Display Transparency 3A-1: The Debit Transaction and describe the flow chart. If you are using a Smart Board, you can display the  A cardholder (the customer) buys a good or chart on the following service with the debit card by entering the page. For a larger image, number in a computer for online shopping or go to: swiping the card in a handheld device or card

reader. http://www.mastercard.com  The business’s bank asks MasterCard to find the /us/company/en/docs/The_ cardholder’s bank. Anatomy_of_a_Transaction_0 20311.pdf  MasterCard validates the card and sends the information to the cardholder’s bank for approval.

 The Cardholder’s bank approves the purchase.  MasterCard sends the approval to the business’s bank.

 The business’s bank tells the business that the

purchase has been accepted.

 The customer completes purchase and receives receipt. 6. Ask what the advantage of using a debit card would be. (don’t have to take the time to write a check; the buyer is only using money that is available in his or her account so there won’t be a bill showing up later; don’t have to carry cash or a checkbook) 7. Explain that citizens may use cash, checks, and debit cards at JA BizTown, depending on the store. Each citizen will receive a debit card when they work at JA BizTown. They will swipe the card instead of writing a check at certain stores in JA BizTown. 8. Remind citizens that the amount of the purchase will be deducted immediately from their bank account, so they must have sufficient funds in their account or the purchase will be denied. Remind them to enter the transaction in their checkbook registers.

See the Check It Out! Scenario, Unit 2, Lesson 3A, for student practice with a debit card transaction in the checkbook register.

The Debit Transaction

Source: Anatomy of a Transaction, MasterCard 2011 Worldwide http://www.mastercard.com/us/company/en/docs/T he_Anatomy_of_a_Transaction_020311.pdf