In this lesson, students learn about credit card usage and credit card consumer protection laws. By the end of the lesson students will be able to analyze the terms of credit cards and recognize what it means to use credit cards responsibly. They will understand the cost of credit and be able to analyze credit card disclosures and credit card statements.
Content Standard 4: Incentives
Grade 8 Benchmarks
3. Incentives can be monetary or non-monetary, or both.
Grade 12 Benchmarks
1. Acting as consumers, producers, workers, savers, investors, and citizens, people respond to incentives in order to allocate their scarce resources in ways that provide the highest possible returns to them.
Content Standard 12: Interest Rates
Grade 8 Benchmarks
1. An interest rate is a price of money that is borrowed or saved.
Grade 12 Benchmarks
4. Riskier loans command higher interest rates than safer loans because of the greater chance of default on the repayment of risky loans.
Content Standard: Using Credit
Grade 4 Benchmarks
1. Interest is the price the borrower pays for using someone else's money.
2. When people use credit, they receive something of value now and agree to repay the lender over time, or at some date in the future, with interest.
Grade 8 Benchmarks
1. People who apply for loans are told what the interest rate on the loan will be. An interest rate is the price of using someone else's money expressed as an annual percentage of the loan principal.
2. The longer the repayment period on a loan and the higher the interest rate on the loan, the larger is the total amount of interest charged on a loan.
3. A credit card purchase is a loan from the financial institution that issued the card. Credit card interest rates tend to be higher than rates for other loans. In addition, financial institutions may charge significant fees related to a credit card and its use.
4. 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. A credit card user can avoid interest charges by paying the entire balance within the grace period specified by the financial institution.
7. Lenders charge different interest rates based on the risk of nonpayment by borrowers. The higher the risk of nonpayment, the higher the interest rate charged. The lower the risk of nonpayment, the lower the interest rate charged.
Grade 12 Benchmarks
1. Consumers can compare the cost of credit using the annual percentage rate (APR), initial fees charged, and fees charged for late payment or missed payments.
2. Banks and financial institutions sometimes compete by offering credit at low introductory rates, which increase after a set period of time or when the borrower misses a payment or makes a late payment.
