4.03 Using Cards Wisely

Instrukcije

Learning Objectives

Students will be able to:

Explain how a credit card works in terms of making purchases and managing payments
Understand how interest is charged and how to avoid or minimize it
Discuss different perceptions of debt and reasons why people’s experiences with debt may vary

National Standards for Personal Financial Education

Managing Credit

1b: Compare the cost of borrowing $1,000 using consumer credit options that differ in rates and fees
10a: Describe how failing to repay a loan can negatively impact a person’s finances and life

DATA CRUNCH: What Interest Rate Do Consumers Pay on Their Credit Cards? 📷10 min

Analyze the image on the worksheet to answer the questions on this Data Crunch.

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2

Between 2000 and 2024, which year had the lowest average credit card interest rate and approximately what was it ?

1

Between 2000 and 2024, what was the approximate difference between the highest average credit card interest rate and the lowest? %

1

What does the graph suggest about the stability of credit card interest rates over a long period of time?

2

The gray bars represent periods of economic recession. What pattern, if any, can you see in how recessions affect credit card interest rates? Why do you think this is?

2

Hypothesize what this chart will look like for the next 10 year period. Explain why.

EDPUZZLE: Credit Card Debt Explained 📷10 min

You can use credit cards for a wide variety of purchases. But, what happens if you spend more on your credit card than you can afford to repay? Watch this video and follow your teacher's directions to answer the questions either in your student activity packet or within the EdPuzzle itself.

1

Which best describes how a credit card works?

The credit card company extends you a line of credit. You purchase "stuff" and the purchase gets directly paid with funds in your checking account.

The credit card company extends you a line of credit. You then pay a small percentage of the cost of those purchases in one annual payment.

The credit card company extends you a line of credit. You purchase "stuff" and then have the choice to pay the balance in full or a minimum payment each month.

The credit card company extends you a line of credit. This is free money that you can use to purchase the "stuff" that you need.

1

When you get a credit card bill, it might seem like you should only pay the “minimum payment due”. Find out how that could cost you and what to do instead.

Your Credit Card

Interest rate (APR): 19.9%
Minimum payment: 3% of your starting balance OR $25, whichever is higher

3

Part I:

Gen Z carries an average credit card balance of around $3,456. Using Bankrate’s Credit Card Payoff Calculator, how much would you pay in interest if you…

Paid in full before the due date?

b. Paid it off over one month (ie. one month late)?

c. Paid it off over 6 months?

12

2

Fill in the blank: If you make a HIGHER monthly payment, you will pay off your debt in(MORE/ LESS) time and pay(MORE/ LESS) in total interest

3

1

EDPUZZLE: Amortization 📷8 min

Home mortgages, auto loans, and student loans are all typically structured as amortized loans. While the minimum monthly payment on a credit card changes each month, the monthly payment of an installment loan is the same every month until the debt is paid off. Watch this video and follow your teacher's directions to answer the questions either in your student activity packet or within the EdPuzzle itself.

ANALYZE: Understanding Amortization

Janet just graduated college and wants one last big adventure before work starts. A 6-week trip to South America sounds perfect, but she needs to take a loan to pay for it. Her bank offers:

Loan Amount: $3,500
Annual Interest Rate: 24%
Loan Term: 2 years

8

Part I: What Will This Trip Really Cost Janet?

Open the amortization calculator and enter the loan amount, interest rate and loan term, then click Calculate.

What is Janet’s monthly payment?

In Month 1, what portion of her payment goes towards principal and interest?

Look at Janet’s payment in Month 2.

How does the breakdown compare with Month 1?
Explain why this happened.

By the time Janet pays off her entire loan,

a. How much interest will she have paid?

b. How much will the trip have cost her in total?

9

1

What would be the benefit of taking a longer time to pay back your loan?

2

Part III: Reflection

What advice would you give Janet as she decides how to structure her loan for the trip?
How would you explain loan payments to a friend who’s never heard of amortization?

VIDEO: 100 People Talk About Debt 📷10 min

Would you take on debt to finance a vacation? To pay for college? To buy a used car? To buy a new car? As you watch these individuals talk about how much debt they have, think about how life circumstances, values, and decision making all impact attitudes toward debt. Then answer the questions.

4

The person at the very end of the video says he has $130,000 in student loan debt and describes it as “worth it.”

Would you agree with him? Why or why not?
What are some other reasons an individual could have that much debt and still consider it worthwhile? Explain your thinking.

1

On the other hand, some people at the beginning of the video had absolutely no debt whatsoever. What are some possible ways they achieve a debt-free lifestyle while others do not or cannot?

1

Other than credit card usage, what are some other reasons people say they are in debt? Do their reasons for carrying debt seem valid to you? Why or why not?

1

Throughout the video, you can tell that individuals’ FEELINGS about their debt are quite different. What might cause one person to worry about the same level of debt that someone else feels quite comfortable having?

1

If you buy a $1000 bicycle, which credit card payoff strategy will result in your paying the LEAST total amount?

Pay the minimum monthly payment

Pay $250 per month until it’s paid off

Don’t make any payments until you have the full $1000 saved, regardless of how long that takes

Pay $100 per month for 10 months

1

If your credit card limit is $800 and your outstanding balance is $725, what is the largest amount you can charge on that card in the upcoming month?

0

75

725

800

1

Each of the following people has $5,000 in debt. Which debt is most worthwhile?

Phil, who spent mostly on GoFundMe campaigns for people he saw on social media

Tyree, who took out a loan for an old used car so he can drive to and from campus

JJ, who used a credit card to pay his daily expenses while he was out of a job

It’s impossible to tell, because we don’t know how much they each valued the spending, how much it impacted their lives, or how easily they can repay the debt

Learning Objectives

4.03 Using Cards Wisely

Learning Objectives

Learning Objectives

DATA CRUNCH: What Interest Rate Do Consumers Pay on Their Credit Cards? 📷10 min

What does the graph suggest about the stability of credit card interest rates over a long period of time?

The gray bars represent periods of economic recession. What pattern, if any, can you see in how recessions affect credit card interest rates? Why do you think this is?

Hypothesize what this chart will look like for the next 10 year period. Explain why.

EDPUZZLE: Credit Card Debt Explained 📷10 min

Which best describes how a credit card works?

Part I:

EDPUZZLE: Amortization 📷8 min

What would be the benefit of taking a longer time to pay back your loan?

VIDEO: 100 People Talk About Debt 📷10 min

On the other hand, some people at the beginning of the video had absolutely no debt whatsoever. What are some possible ways they achieve a debt-free lifestyle while others do not or cannot?

Other than credit card usage, what are some other reasons people say they are in debt? Do their reasons for carrying debt seem valid to you? Why or why not?

Throughout the video, you can tell that individuals’ FEELINGS about their debt are quite different. What might cause one person to worry about the same level of debt that someone else feels quite comfortable having?

If you buy a $1000 bicycle, which credit card payoff strategy will result in your paying the LEAST total amount?

If your credit card limit is $800 and your outstanding balance is $725, what is the largest amount you can charge on that card in the upcoming month?

Each of the following people has $5,000 in debt. Which debt is most worthwhile?

Learning Objectives

DATA CRUNCH: What Interest Rate Do Consumers Pay on Their Credit Cards? 📷10 min

What does the graph suggest about the stability of credit card interest rates over a long period of time?

The gray bars represent periods of economic recession. What pattern, if any, can you see in how recessions affect credit card interest rates? Why do you think this is?

Hypothesize what this chart will look like for the next 10 year period. Explain why.

EDPUZZLE: Credit Card Debt Explained 📷10 min

Which best describes how a credit card works?

What is the advantage of paying your credit card balance in full each month?

What is an outstanding balance?

Why is it more difficult to get out of debt when only paying the minimum payment?

The video advises you to "be a deadbeat.” What does that mean?

Part I:

What strategies can consumers use to reduce the interest they’ll pay on credit card debt?

These scenarios assumed a one-time balance with no additional purchases. If you also used your credit for everyday expenses, how might that affect your approach to repayment?

EDPUZZLE: Amortization 📷8 min

What would be the benefit of taking a longer time to pay back your loan?

VIDEO: 100 People Talk About Debt 📷10 min

On the other hand, some people at the beginning of the video had absolutely no debt whatsoever. What are some possible ways they achieve a debt-free lifestyle while others do not or cannot?

Other than credit card usage, what are some other reasons people say they are in debt? Do their reasons for carrying debt seem valid to you? Why or why not?

Throughout the video, you can tell that individuals’ FEELINGS about their debt are quite different. What might cause one person to worry about the same level of debt that someone else feels quite comfortable having?

If you buy a $1000 bicycle, which credit card payoff strategy will result in your paying the LEAST total amount?

If your credit card limit is $800 and your outstanding balance is $725, what is the largest amount you can charge on that card in the upcoming month?

Each of the following people has $5,000 in debt. Which debt is most worthwhile?

What is the advantage of paying your credit card balance in full each month?

What is an outstanding balance?

Why is it more difficult to get out of debt when only paying the minimum payment?

The video advises you to "be a deadbeat.” What does that mean?

What strategies can consumers use to reduce the interest they’ll pay on credit card debt?

These scenarios assumed a one-time balance with no additional purchases. If you also used your credit for everyday expenses, how might that affect your approach to repayment?