Peterson's - FAABteachersmanual (Page 26)

Teacher's Manual

Page 26

CREDIT CARDS

Lesson Plan #6


Lesson Objective: The students will understand basic facts about credit cards.
The students will gain hands-on experience in calculating some credit card
payments.


Procedure:

1. Ask the students 1) If any of them have credit cards, 2) How credit

cards work, and 3) Why credit card companies would be interested in
offering so many credit cards to college students who don't have jobs.
Explain that credit card companies view college students as people
with potential income who will make major purchases in the future
(college students earn 60% more than high school graduates).
Research has shown that there is brand loyalty to the first credit card
issuer so if a company can be a college student's first card, they may
have a customer for life. Credit card issuers also recognize that if a
person is unable to pay off their balance each month, interest will
accrue, resulting in more money for the issuers. Review some basic
facts about credit cards in Overhead 12.

2. Explain to students that that credit card problems occur when people

can't pay off their monthly balances and the interest starts to accrue.
Show the students on a board or flipchart that a purchase of a shirt at
$100 with an 18%APR, and a minimum payment of 2.5% but no less
than $10 each month will cost $ 109.16 in eleven months. Work
together as a class to demonstrate that if you buy a computer for
$2,500 and repay it over 20 years, your interest will be $3,365.51 and
you will have actually paid $5,865.51 for the computer. The bottom
line? You end up paying more money if you charge.

3. Now tell students that it's time to play the Credit Card game. Place

photographs of cars, jewelry, stereos, restaurants, bikes, headphones,
CD's, etc mounted on poster board around the room. Make sure that
you have written a dollar amount under each picture (CD - $15.98,
etc.). Tell each student that they have a credit line of $3,000.