Grade: 8 Lesson #7

What Is The Real Cost Of Borrowing Money?

SS.8.FL.4.3 Examine the fact that borrowers who use credit cards for purchases and who do not pay the full balance when it is due pay much higher costs for their purchases because interest is charged monthly. Explain how a credit card user can avoid interest charges by paying the entire balance within the grace period specified by the financial institution.

Correlated Literacy Standards

LAFS.8.SL.1.2 Analyze the purpose of information presented in diverse media and formats (e.g., visually, quantitatively, orally) and evaluate the motives (e.g., social, commercial, political) behind its presentation.

LAFS.68.WHST.2.4

Write informative/explanatory texts, including the

narration of historical events, scientific procedures/

experiments, or technical processes.


SS.8.FL.4.3 Examine the fact that borrowers who use credit cards for purchases and who do not pay the full balance when it is due pay much higher costs for their purchases because interest is charged monthly. Explain how a credit card user can avoid interest charges by paying the entire balance within the grace period specified by the financial institution.

What’s the Real Cost of Using a Credit Card?

Lesson #: 7

Correlated Florida Standards (See Full Text on Cover Page)

  • LAFS.8.SL.1.2
  • LAFS.68.WHST.2.4

Essential Question

  • How do credit cards work?
  • What happens if you do not pay off a credit card balance when a payment is due?
  • How can you avoid paying interest on a credit card?

Learning Goals/Objectives

  • Students will understand that if the full balance of a credit card bill is not paid before the end of a grace period, the borrower will have to pay interest on the remaining balance.
  • Describe how interest on a credit card works

Overview

This lesson focuses on the consequences of not paying off a credit card balance in full at the end of a billing period and the benefits of paying off a credit card balance in full.

Materials

  • Tablet/laptop computer
  • Discover credit card commercial
  • (30 sec)
  • Video explaining what happens when you make minimum credit card payments.
  • PcCdEnK3Q1OMUUH1Fa&index=3 (1 min 19 sec.)
  • PowerPoint: Credit Cards- What You Need to Know
  • Interactive Financial website for case files:

Time

  • 50 minutes

Activity Sequence

INTRODUCTION/HOOK (5 minutes)

  • Ask students the names of some credit card commercials they have seen on TV. As students give responses, write the name of the credit card companies on the board. After all responses have been given, follow up with questions such as:
  • What do the commercials typically show?
  • Do the commercials explain how the credit cards work?
  • What are some of the words that are typically used in the commercial?
  • Do the commercials discuss the risks of having a credit card?
  • Show the following YouTube video that discusses credit cards…
  • Have students reflect by either discussion or journal entry about what they saw and learned from the video

ACTIVITY (35 minutes)

1.Show the YouTube video clip which addresses what happens when minimum payments on a credit card are made: PcCdEnK3Q1OMUUH1Fa&index=3 (2 minutes)

2.After the video concludes, ask students to summarize the main point of the video they just viewed.

  • Ask what happened to the character mentioned in the video and what happened to her credit card balance. (5 minutes)
  1. Go through the PowerPoint presentation - Credit Cards- What You Need to Know(attached in the Materials section). The PowerPoint goes over why people typically use credit cards. Additionally, information on what an APR is, how billing cycles work, and tips to avoid paying late fees and interest is provided. (15 minutes)
  1. Upon conclusion of the PowerPoint, have students access: This interactive website goes through “case files” of four individuals and their experience with using credit cards and how they handled their debt.
  • When students go to the homepage, have them go through the “credit card primer” tab to the right of the screen (or you may go through this as a class). This portion of the site explains exactly what credit cards are, where the money comes from, and it also clarifies why a bank or other financial institutions would loan out money to people. (10 minutes)
  1. Next, have students complete the “Case Files” activity on their own. (10 minutes)

CLOSURE (10 minutes)

Now that students should have a basic understanding of how credit cards work, have students write a brief expository essay. The essay should detail the advice they would give to a friend explaining what can happen to the total cost of borrowing money on a credit card when only the minimum payment is made each month. In the essay, students are to also explain why it is beneficial to pay off the full balance of a credit card to avoid interest charges. Upon completion of this, students may peer edit each other’s writing.

OPTIONAL EXTENSION SUGGESTION/HOME LEARNING

  1. Havestudents research three different credit card offers, either by a magazine clipping or internet search. From what they find have students answer the following for each of the credit cards:
  2. Who is offering the credit card?
  3. What type of incentives/rewards does the card offer?
  4. What products, if any, does the credit card encourage you to purchase?
  5. What is the introductory APR of the card?
  6. What could be a potential risk of the credit card?
  7. Are there any annual fees associated with the card?
  8. What type of consumer would best benefit from that credit card?

Resources Used for Lesson

PcCdEnK3Q1OMUUH1Fa&index=3