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Q T Pi Fashions - Learning About Credit Card Use

Key Economic Concepts:

• Choice
• Consumer Economics
• Consumers
• Credit
• Decision Making
• Incentive
• Interest Rate
• Money Management

Description:

Credit cards are convenient, user friendly, and at times dangerous. In this lesson students learn the joys and dangers of using credit as they help Credita, the main character in this activity, solve her credit problems.

Lesson Objectives:

Students will:

• Define the relationship between credit and incentives, for buyers when purchasing goods and/or services.
• Define the relationship between interest and incentive, for borrowers when purchasing goods and/or services.
• Analyze the pros and cons of credit card use.
• Describe how finance charges effect the purchases of items.

Introduction:

Credit cards are convenient, user friendly, and at times dangerous. In this lesson students will learn the joys and dangers of using credit as they help Credita, the main character in this activity, solve her credit problems. Today's teens are frequently offered credit cards through the mail, and the temptation to "buy now--pay later" for instant gratification, may be quite compelling. This lesson illustrates how quickly credit card purchases can create a dangerous situation for buyers.

Special note: I used a female character in this example, but the lesson could just as easily be changed to feature a male character. He could run into difficulty using his credit card to purchase automobile accessories, sporting equipment, or concert tickets.

Resources:

• "Bankrate.com Student Credit Cards webpage": Students will use the bankrate.com web site to complete the activities in the "Possible Interactions" section below.
  http://www.bankrate.com/brm/rate/cc_ratehome.asp?cc_online=0&hAboutType=C&product=cc&prodtype=cc&web=brm&R1=1&card_type=Student&card_class=All&cc_freq=1 ^[1]
   
• "Q T Pi Fashions worksheet": Students will use the Q T Pi Fashions worksheet as a learning tool in the process.
  http://www.econedlink.org/lessons/docs_lessons/346_QTPi_Fashions_lesson1.pdf
   
• "Financial Fitness for Life Curriculum": For additional lessons on personal finance, students may use the National Council on Economic Education's new curriculum, "Financial Fitness for Life: Bringing Home the Gold - 9-12" and "Financial Fitness for Life: Shaping Up Your Financial Future - 6-8." Visit the National Council on Economic Education's web site at www.ncee.net and click on the special "Financial Fitness for Life" link. Information is available at this site for the purchase of "Financial Fitness" materials.
  http://fffl.councilforeconed.org ^[2]

Process:

1. Tell the students they are going to learn about the joys and dangers involved in the use and misuse of credit cards. They are going to meet Credita who has just received a new card from her favorite clothing store.

2. Ask the students to define credit, finance charges, interest, credit limit, incentive and annual percentage rate (APR). Make sure the students have a good understanding of these terms.

3. Ask students: What incentive is there for credit card providers to provide credit (lend money) to credit card users? [Credit card providers receive interest from credit card users sometimes at high percentage rates. Credit card companies can also charge an annual fee for the use of their card, and they can also charge the businesses a percentage of the cost of the goods and services that they have provided.]

4. Distribute the handout, Q T Pi Fashions worksheet. Read or have the students read the introduction to the lesson.

5. Have the students work individually or in pairs to complete the first balance sheet and the answers to questions 1-4.

6. Use the "Teachers Copy" answer sheet in reviewing this section of the lesson

7. Then, assign the students, individually or in pairs, to complete the second balance sheet and questions 5-8.

8. Use the "Teachers Copy" answer sheet in reviewing this section of the lesson.

Note:

A special "Teacher's Copy" of the Q T Pi Fashions worksheet has been created and may be printed out for reference use and for answers to the Q T Pi Fashions handout.
For Computation purposes:
1. All figures are rounded to the nearest 100.
2. The 1.75% interest and finance rate has been rounded to a .018

Conclusion:

Ask the students to write a letter to Credita given the following: If Credita asked you for advice about the smart use of credit, what would you tell her so that she could avoid the problems she encountered during her last credit card experience? Try to use as many of the new credit terms you learned in your letter.

Assessment Activity:

Either the "Conclusion" activity or any of the bankrate.com activities (or both) could be used as possible evaluation activities.

Teachers could also create a scenario of a credit card situation and have the students complete the activity as they did in the Q T Pi Lesson.

Extension Activity:

Using the bankrate.com. web site within the Credit Cards page, students should find the best card for themselves. To do this they should go to the "Student Card page ^[1] " and start looking for the best cards. Have the students select three cards they would consider. Have the students name and give the particulars of the cards, and explain why they would apply for these cards.

Return to Credit Card page ^[3] to complete the on-line activities:

• "How's Your Credit?" click here ^[4]
• "Calculate the real cost of your debt." [Teacher can create debt amount.] click here ^[5]
• "What will it take to pay off your credit card?" [Teacher can create the amounts, etc.] click here ^[6]
• "The true cost of paying the minimum." [Teacher can create credit card balance, interest rate and/or amount per month or desired months.] click here ^[7]
• "The true cost." [Teacher can create a balance, interest rate, minimum payment calculated, minimum payment, fixed payment schedule] click here ^[3]

Links Used:

1. ^{^ ^} "http://www.bankrate.com/brm/rate/cc_ratehome.asp?cc_online=0&hAboutType=C&product=cc&prodtype=cc&web=brm&R1=1&card_type=Student&card_class=All&cc_freq=1" - (www.bankrate.com)
2. ^{^} "http://fffl.councilforeconed.org" - (fffl.councilforeconed.org)
3. ^{^ ^} "Credit Card page" - (www.bankrate.com)
4. ^{^} "click here" - (www.bankrate.com)
5. ^{^} "click here" - (www.bankrate.com)
6. ^{^} "click here" - (www.bankrate.com)
7. ^{^} "click here" - (www.bankrate.com)

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