3.2 Intro to Credit Cards (Due 10/18/22 SoC)

Last updated over 1 year ago

42 Nsɛmmisa

Hyɛ no nsow a efi ɔkyerɛwfo no hɔ:

Akwankyerɛ

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Day 2 10/13/22

Day 3 10/17/22

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Day 4 10/19/22

Exploration: Compound Interest Formula and Credit Cards

Day 5 10/20/22

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3.2 Intro to Credit Cards (Due 10/18/22 SoC)

Last updated over 1 year ago

42 Nsɛmmisa

Hyɛ no nsow a efi ɔkyerɛwfo no hɔ:

In this lesson, you will learn to:

Explain how a credit card works in terms of making purchases and managing payments
Read a Schumer box and identify how terms of the card impact total cost of purchases
Understand how interest is charged and how to avoid or minimize it
Read a credit card statement

Complete the entire document and use full sentences when prompted for full credit.

Akwankyerɛ

In this lesson, you will learn to:

Explain how a credit card works in terms of making purchases and managing payments
Read a Schumer box and identify how terms of the card impact total cost of purchases
Understand how interest is charged and how to avoid or minimize it
Read a credit card statement

Complete the entire document and use full sentences when prompted for full credit.

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Do you think it’s a good idea for high school students to have a credit card? What about college students? Adults? Explain why you feel this way.

Students and Credit Cards

Answer the questions on the right.

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After hearing the opinions of the students in this video, do you think YOU would want a credit card in college? Why or why not?

Credit Card Basics

Watch this video and then answer the questions on the right.

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What is the difference between credit & debit? UCS

Credit Card Debt Explained

Watch this video and answer the questions on the right.

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How can you avoid paying interest on your credit card?

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Explain what happens if you make the minimum payment every month?

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How does the credit card companies' definition of a deadbeat compare to the traditional meaning?

Day 2 10/13/22

Decipher Credit Card Offers With the Schumer Box

Review this reference sheet and answer the questions on the right.

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This credit card offer has a one year introductory offer. After that what does the interest rate go up to?

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What happens to the APR (interest rate) if you make a late payment?

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What is the penalty fee if you make a late payment? (Assume that you have more than a $1000 balance.)

CALCULATE: Shopping with Interest

These questions will illustrate how even smaller purchases cost more when you purchase on a credit card and do not pay the balance in full each month. For this activity, we will use the credit card calculator from bankrate.com; open it in another window. We also make these assumptions:

Your credit card’s interest rate (APR) is 19.9%.
The minimum payment due each month is 3% of your starting balance.

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Suppose you have a credit card bill of $1,275 for the month of October. If you pay the full balance before your bill is due, how much will you pay in interest?

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Day 3 10/17/22

COMPARE: Select a Credit Card

When you are trying to open a new financial account/product of any type, there are two core principles you should keep in mind:

Brainstorm which features or criteria matter most to you, personally, for how you plan to use the account/product
Comparison shop to see which accounts or financial products best meet your specific needs

You can use these principles for any type of account/product -- checking, savings, credit card, mortgage, student loan, brokerage account, health insurance etc.

Steps for Comparison Shopping for a Credit Card

Brainstorm features/criteria you value in the Credit
Rank your top 3 or 4 features/criteria
Pick credit cards to research & compare
Complete a decision matrix
Make your choice!

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Brainstorm features/criteria you value in the credit offers you found online. These questions may help get you thinking:
Do you care more about avoiding fees/costs, accumulating perks, convenience, etc?
Will you access your account/product primarily online or do you need in-person access?
Do you prefer a large, well-known financial institution or more of a small-business feel?
What are the interest rates?

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Complete a decision matrix Conduct online research on how each account/product compares for each of the features/criteria that matter to you. You may need to dig into the agreement to find specific terms.

Day 4 10/19/22

Exploration: Compound Interest Formula and Credit Cards

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CALCULATE: Calculating Interest

Interest on a loan can be calculated in a variety of ways. Examine the two tables and use them to answer the questions to the right.

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Briefly describe how each month’s interest is calculated in Table 1.

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How is Table 2’s calculation different?

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Would you prefer Table 1 or Table 2 if you were earning interest on an investment? Explain your answer.

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Day 5 10/20/22

VIDEO: APR vs APY

When shopping for a loan, you may see the terms APR and APY. What are these terms and how do they apply to compound interest? Watch the video at the top of the linked article, then use it to answer the questions

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What do APR and APY stand for?

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What is the key difference between APR and APY?

Example

If a loan charges 1% interest per month, what is its APR and APY?

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APR = 1% · 12 = 12%

APR is 12%

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APY = 0.1268

APY is 12.68%.

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Take a look at the following advertisements for financial products.
Why does the savings account advertise using APY while the credit card advertises using APR?

Scenario 1:

Alonso bought a $3,000 gaming computer using his credit card. A special financing offer allows him to make no payments for 2 years but interest will still accrue at a rate of 16.92% APR and be added to the bill if he doesn't pay full balance in 2 years.

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How much more is Alonso paying by having his interest compounded daily versus yearly?

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How does the frequency of compounding impact the overall cost of Alonso’s total interest?

Now let’s calculate the APY of each compounding period to see what percentage rate Alonso is actually paying annually. Recall the formula:

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Most credit cards are compounded monthly or daily, which means that Alonso is paying about 1.5% more annually than the advertised APR. What effect could this knowledge have had on Alonso’s purchasing decisions?

3.2 Intro to Credit Cards (Due 10/18/22 SoC)

Day 2 10/13/22

Day 3 10/17/22

Day 4 10/19/22

Exploration: Compound Interest Formula and Credit Cards

Day 5 10/20/22

3.2 Intro to Credit Cards (Due 10/18/22 SoC)

Do you think it’s a good idea for high school students to have a credit card? What about college students? Adults? Explain why you feel this way.

Answer the questions on the right.

After hearing the opinions of the students in this video, do you think YOU would want a credit card in college? Why or why not?

Watch this video and then answer the questions on the right.

What is the difference between credit & debit? UCS

Watch this video and answer the questions on the right.

How can you avoid paying interest on your credit card?

Explain what happens if you make the minimum payment every month?

How does the credit card companies' definition of a deadbeat compare to the traditional meaning?

Day 2 10/13/22

Review this reference sheet and answer the questions on the right.

This credit card offer has a one year introductory offer. After that what does the interest rate go up to?

What happens to the APR (interest rate) if you make a late payment?

What is the penalty fee if you make a late payment? (Assume that you have more than a $1000 balance.)

CALCULATE: Shopping with Interest

Suppose you have a credit card bill of $1,275 for the month of October. If you pay the full balance before your bill is due, how much will you pay in interest?

Day 3 10/17/22

COMPARE: Select a Credit Card

Complete a decision matrix Conduct online research on how each account/product compares for each of the features/criteria that matter to you. You may need to dig into the agreement to find specific terms.

Day 4 10/19/22

Exploration: Compound Interest Formula and Credit Cards

CALCULATE: Calculating Interest

Briefly describe how each month’s interest is calculated in Table 1.

How is Table 2’s calculation different?

Would you prefer Table 1 or Table 2 if you were earning interest on an investment? Explain your answer.

Day 5 10/20/22

VIDEO: APR vs APY

What do APR and APY stand for?

What is the key difference between APR and APY?

Example

Take a look at the following advertisements for financial products.Why does the savings account advertise using APY while the credit card advertises using APR?

Scenario 1:

How much more is Alonso paying by having his interest compounded daily versus yearly?

How does the frequency of compounding impact the overall cost of Alonso’s total interest?

Most credit cards are compounded monthly or daily, which means that Alonso is paying about 1.5% more annually than the advertised APR. What effect could this knowledge have had on Alonso’s purchasing decisions?

Do you think it’s a good idea for high school students to have a credit card? What about college students? Adults? Explain why you feel this way.

Answer the questions on the right.

After hearing the opinions of the students in this video, do you think YOU would want a credit card in college? Why or why not?

Watch this video and then answer the questions on the right.

What is the difference between credit & debit? UCS

Watch this video and answer the questions on the right.

How can you avoid paying interest on your credit card?

Explain what happens if you make the minimum payment every month?

How does the credit card companies' definition of a deadbeat compare to the traditional meaning?

Review this reference sheet and answer the questions on the right.

This credit card offer has a one year introductory offer. After that what does the interest rate go up to?

What happens to the APR (interest rate) if you make a late payment?

What is the penalty fee if you make a late payment? (Assume that you have more than a $1000 balance.)

CALCULATE: Shopping with Interest

Suppose you have a credit card bill of $1,275 for the month of October. If you pay the full balance before your bill is due, how much will you pay in interest?

Summarize the effect of credit card interest on the real cost of items.

COMPARE: Select a Credit Card

Complete a decision matrix Conduct online research on how each account/product compares for each of the features/criteria that matter to you. You may need to dig into the agreement to find specific terms.

Using the Compound Interest Formula

Use the following information to calculate the total balance after interest is calculated.P = $5000r = 6.25%Compounded daily for 5 years

Use the following information to calculate the total balance after interest is calculated.P = $8,500r = 3.175%Compounded monthly for 10 years

Use the following information to calculate the total balance after interest is calculated.P = $28,000r = 9%Compounded annually for 5 years

Use the following information to calculate the total balance after interest is calculated.P = $275r = 6.25%Compounded daily for 20 years

CALCULATE: Calculating Interest

Briefly describe how each month’s interest is calculated in Table 1.

How is Table 2’s calculation different?

Would you prefer Table 1 or Table 2 if you were earning interest on an investment? Explain your answer.

Would you prefer Table 1 or Table 2 if you were being charged interest on a credit card or loan? Explain your answer.

VIDEO: APR vs APY

What do APR and APY stand for?

What is the key difference between APR and APY?

Example

Take a look at the following advertisements for financial products.Why does the savings account advertise using APY while the credit card advertises using APR?

Scenario 1:

How much more is Alonso paying by having his interest compounded daily versus yearly?

How does the frequency of compounding impact the overall cost of Alonso’s total interest?

Most credit cards are compounded monthly or daily, which means that Alonso is paying about 1.5% more annually than the advertised APR. What effect could this knowledge have had on Alonso’s purchasing decisions?

Summarize the effect of credit card interest on the real cost of items.

Take a look at the following advertisements for financial products.
Why does the savings account advertise using APY while the credit card advertises using APR?

Use the following information to calculate the total balance after interest is calculated.
P = $5000
r = 6.25%
Compounded daily for 5 years

Use the following information to calculate the total balance after interest is calculated.
P = $8,500
r = 3.175%
Compounded monthly for 10 years

Use the following information to calculate the total balance after interest is calculated.
P = $28,000
r = 9%
Compounded annually for 5 years

Use the following information to calculate the total balance after interest is calculated.
P = $275
r = 6.25%
Compounded daily for 20 years

Take a look at the following advertisements for financial products.
Why does the savings account advertise using APY while the credit card advertises using APR?

Use the following information to calculate the total balance after interest is calculated.
P = $5000
r = 6.25%
Compounded daily for 5 years

Use the following information to calculate the total balance after interest is calculated.
P = $8,500
r = 3.175%
Compounded monthly for 10 years

Use the following information to calculate the total balance after interest is calculated.
P = $28,000
r = 9%
Compounded annually for 5 years

Use the following information to calculate the total balance after interest is calculated.
P = $275
r = 6.25%
Compounded daily for 20 years