Using credit cards is convenient, user friendly, and at times dangerous. In this lesson you will learn the joys and dangers of using credit as you 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.
In this lesson you will define the relationship between credit and incentives, for buyers when purchasing goods and/or services, and define the relationship between interest and incentive, for borrowers when purchasing goods and/or services. You will also analyze the pros and cons of credit card use, and describe how finance charges effect the purchases of items.
1. You are about to learn about the joys and dangers involved in the use and misuse of credit cards. Soon you will meet Credita who has just received a new card from her favorite clothing store.
2. Now define the terms credit, finance charges, interest, credit limit, incentive and annual percentage rate (APR). Make sure that you have a good understanding of these terms.
3. Think about what incentive there are for credit card providers to provide credit (lend money) to credit card users?
4. Use the following link, the Q T Pi Fashions, which is a file and then read the introduction to the lesson.
5. When completing this worksheet you may work individually or in pairs to complete the first balance sheet and the answers to questions 1-4.
6. Working individually or in pairs complete the second balance sheet and questions 5-8.
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 .081
Now write a letter to Credita after reading the following:
Write a letter to Credita, giving her advice about the following situation: 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.
Now complete the following activities using the bankrate.com site. Within the Credit Cards page, you should search for the best card for yourself. To do this go to the "Student Card page " and start looking for the best cards. Now you should select three cards that you would consider. Make sure that on the list you name and give the particulars of the cards, and explain why you would apply for these cards.
Return to Credit Card page to complete the on-line activities:
- How's Your Credit?
- Calculate the real cost of your debt [Teacher can create debt amount.]
- What will it take to pay off your credit card? [Teacher can create the amounts, etc.]
- The true cost of paying the minimum . [Teacher can create credit card balance, interest rate and/or amount per month or desired months.]