Credit · Credit Cards · Video Lesson
What Is a Credit Card?
A free video lesson introducing students to the basics of credit cards — what they are, how they differ from cash and debit, how credit limits and interest work, and how to use credit responsibly.
What Students Learn
Learning objectives
- What a credit card is — a card that allows purchases on credit, with an agreement to repay the card issuer later
- How a credit card functions as a short-term loan and how it differs from a debit card
- What a credit limit is and how it is determined based on income and credit history
- How interest and fees accumulate when a balance is carried past the due date
- The importance of knowing your APR, payment due dates, and credit terms before using a card
- How responsible credit card use builds credit history and supports long-term financial health
Video Lesson
Watch: What Is a Credit Card?
For Teachers
How to use this lesson
Play the video as a whole-class opener for a credit card or consumer credit unit. The article below provides additional reading depth and can be assigned for independent reading before or after viewing.
Discussion: Have students seen or heard about credit cards before? What’s the difference between using a credit card and using a debit card at checkout? What could go wrong if someone doesn’t pay their full balance each month? These questions help surface prior knowledge and set up the “cost of credit” lessons that follow.
Best used as the entry point to a credit card unit — before lessons on APR, credit card statements, and building credit. Also works well alongside the what-is-credit lesson for a cohesive credit introduction module.
Read
What is a credit card?
A credit card is a card that consumers can use to purchase goods and services. If you have a credit card, you agree to pay the credit card company the full cost of the item purchased — as well as any fees or interest, if applicable — at a later date. A credit card is essentially a loan that allows for purchases on credit: you don’t need cash to make the purchase, and instead you repay the credit card company later, along with any interest and fees.
How can you get a credit card?
You apply for a credit card through a bank or other financial services company, which lets the lender determine whether you can repay the amount borrowed. Once you are approved for a credit line, you sign an agreement listing details such as your credit limit, purchase interest rate, and any fees, along with a promise to repay any money borrowed. You should know what the interest rate is and when your credit card bill is due each month.
Your credit limit is the maximum amount you can borrow on the card. It is determined in large part by your credit history and income — credit card companies examine these before approving a card.
What happens when you use your credit card?
When you use a credit card — for example, making a purchase at a store — you authorize the credit card company to pay for the purchase on your behalf, with the promise that you will repay the amount later. Every purchase is added to the cardholder’s statement, and the company issues a bill each billing period, usually monthly. To avoid interest or other charges, you need to pay the full amount on or before the due date.
Cardholders who do not pay their monthly bill in full accrue interest, which compounds over time for as long as there is an unpaid balance. They are also required to make minimum monthly payments until the balance is paid off.
What are the advantages and costs of using credit cards?
Credit cards give you quick access to money, can be used in-store or online, and provide extra cash in an emergency. Many offer cash back or rewards points and an opportunity to improve your credit score. The downside is that they may carry high interest rates and fees and can tempt you to spend too much and take on too much debt.
In short, used smartly, credit cards can be very convenient and beneficial — but be cautious about how you use them and watch out for overspending, so you reap the benefits and avoid the drawbacks.
This lesson and video are free to use. No account required.
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