Module 4: Credit Cards
Credit and credit cards can be useful and they can also be very dangerous. When you graduate from high school you will likely receive many offers for different credit cards. It is easy to get sucked in to the thought of "free money" but it is important that you make wise financial decisions and understand the implications of borrowing money on credit. It is important that you first know some important vocabulary.
Credit is a loan of money that is given to a borrower for a specified amount and a specified period of time.
Credit Cards are a type of "money" that enables the card holder to purchase goods or services and receive cash on credit.
Interest Rate is the cost of using the money provided by a loan, credit card, or line of credit, usually expressed as a percentage over a period of time. Interest also refers to the income, figured as a percentage of the original loan or principal.
APR (Annual Percentage Rate) is the cost of credit, or how much you must pay to get a loan, on a yearly basis. The APR is expressed as a percentage, and it reflects the interest rate, as well other fees and charges. APRs can vary widely from one credit card to another.
Credit Limit is the maximum amount of money a credit card holder is allowed to borrow using the credit card.
Minimum Payment is the smallest amount of payment required by a credit card company, often on a monthly basis. If a credit card user does not make the minimum payment, the account can go into default. Many minimum payments are calculated based on a percentage of the total balance.
Now, you will complete an investigation into several scenarios regarding purchasing on a credit card. Follow the link to complete all parts of the "It Costs What?" activity. You will be including a write up of your findings.
Credit is a loan of money that is given to a borrower for a specified amount and a specified period of time.
Credit Cards are a type of "money" that enables the card holder to purchase goods or services and receive cash on credit.
Interest Rate is the cost of using the money provided by a loan, credit card, or line of credit, usually expressed as a percentage over a period of time. Interest also refers to the income, figured as a percentage of the original loan or principal.
APR (Annual Percentage Rate) is the cost of credit, or how much you must pay to get a loan, on a yearly basis. The APR is expressed as a percentage, and it reflects the interest rate, as well other fees and charges. APRs can vary widely from one credit card to another.
Credit Limit is the maximum amount of money a credit card holder is allowed to borrow using the credit card.
Minimum Payment is the smallest amount of payment required by a credit card company, often on a monthly basis. If a credit card user does not make the minimum payment, the account can go into default. Many minimum payments are calculated based on a percentage of the total balance.
Now, you will complete an investigation into several scenarios regarding purchasing on a credit card. Follow the link to complete all parts of the "It Costs What?" activity. You will be including a write up of your findings.
Now, you will need to look back at your Unit 4: Logarithms and Exponents to answer the following question (you will do this in the google doc).
Problem: You’ve just graduated from high school and the first credit card that you got charges 12.49% interest to its customers and compounds that interest monthly. Within one day of getting your first credit card, you max out the credit limit by spending $1,200.00. If you do not buy anything else on the card and you do not make any payments, how much money would you owe the company after 6 months?
Problem: You’ve just graduated from high school and the first credit card that you got charges 12.49% interest to its customers and compounds that interest monthly. Within one day of getting your first credit card, you max out the credit limit by spending $1,200.00. If you do not buy anything else on the card and you do not make any payments, how much money would you owe the company after 6 months?
For your project, you will be researching two types of credit cards online. You will then chose the best one that you will be using to make a big purchase post college. Your purchase must be $2000 or more...maybe a Spring Break trip or a shopping spree (do not purchase a car!). We will assume you will only pay the minimum amount during your college career (could be more than 4 years depending on your career choice from the past modules). After you graduate from college, you will then add a bigger payment into your monthly budget. Access the google doc to complete this activity. Come back to the website when you have complete this to complete the next part below. *When using the calculator, if your chosen credit card has a range of APR interest rate, use the average of the two numbers in the given range of APR*
So, it may be a little scary to get a credit card, but building credit is important for your future. Watch the video below to help you understand finacially healthy ways to build credit in college. Complete the write up in the google doc after you watch the video.
Sources: http://www.thirteen.org/finance/educators/p-lesson3_org1.html;