Grade: 10 Lesson # 12
What should I consider when choosing a credit card?
SS.912.FL.4.1 Discuss ways that consumers can compare the cost of credit by using the annual percentage rate (APR), initial fees charged, and fees charged for late payment or missed payments.
Correlated Literacy Standards:
LAFS.910.W.3.7 Conduct short as well as more sustained research projects to answer a question
(Including a self-generated question) or solve a problem; narrow or broaden the inquiry when appropriate; synthesize multiple sources on the subject, demonstrating understanding of the subject under investigation.
LAFS.910.W.3.8 Gather relevant information from multiple authoritative print and digital sources, using advanced searches effectively; assess the usefulness of each source in answering the research question; integrate information into the text selectively to maintain the flow of ideas, avoiding plagiarism and following a standard format for citation.
SS.912.FL.4.1 Discuss ways that consumers can compare the cost of credit by using the annual percentage rate (APR), initial fees charged, and fees charged for late payment or missed payments.
Read the Fine Print!
Lesson Number: 12
Correlated Florida Standards (See Full Text on Cover Page)
· LAFS.910.W.3.7
· LAFS.910.W.3.8
Essential Questions
· What are the different types of credit cards available?
· What are the most important factors to consider when selecting a credit card?
Learning Goals/Objectives
· Define the concept of interest rates and payment fees.
· Identify and explain the criteria to be considered when choosing a credit card, including the extra fees and payments that go with using a credit card.
Overview
· Students will evaluate spending and credit use, as well as important aspects to consider when making decisions about choosing a credit card. Students will identify the concept of hidden fees and payments associated with credit cards.
Materials
· Tablets
· Introduction Activity Quiz: http://www.themint.org/pdf/activity_Credit_Card_IQ.pdf
· PowerPoint: “Credit 411”
· Student Handout 1: Checklist for Comparing Credit Cards (Included in Lesson)
· Student Handout 2: Credit Card Bill of Rights (Included in Lesson)
Time
· 50 minutes
Activity Sequence
INTRODUCTION/HOOK
· Tell the students that today’s class will be devoted to credit cards. Orally, ask the students the questions available from: http://www.themint.org/pdf/activity_Credit_Card_IQ.pdf, and have them raise their hands if they believe the statement is true or false. Discuss briefly the results of the quiz. (5 minutes)
ACTIVITY
1. Explain to students that the first step in selecting a credit card is to understand all the fine print—fees and payments associated with the card. Then, open and review the PowerPoint, “Credit Card 411.” This introduces the different fees and payments that students must consider when selecting a credit card. (20 minutes)
2. Students will complete Handout 1: Checklist for Comparing Credit Cards (20 minutes)
CLOSURE
· End with a class discussion of what students learned from the lesson. What did the find most interesting? Confusing? How do they feel about applying for a credit card? What will be the most important feature to consider?(5 minutes)
OPTIONAL EXTENSION SUGGESTION/HOME LEARNING
· Extension activities/Home learning for this assignment would be to have them complete the following components (adapted from http://www.econedlink.org/lessons/index.php?lid=847&type=educator, citation below):
o First, have students visit the Federal Reserve's Credit Card Repayment Calculator (http://www.federalreserve.gov/creditcardcalculator/) to gain an understanding of how long it can take to pay off a credit card balance. Ask students to enter a random total balance (somewhere between $500- and $2,000) and the highest annual percentage rate (APR) (between 7%- and 25%). The site will provide an estimated initial payment, the amount of time needed to pay off the balance, and the amount of interest the card holder would have to pay in that amount of time. Have the students click on the question marks to learn how these numbers are generated. After they have done this, have them scroll down to the bottom and enter the number of years in which they want to have the card paid off. Once again, the site will provide information about how the numbers are generated. Do the same for a hypothetical amount they would be able to pay each month on the right. Discuss some of the different scenarios the students encountered. This link is a great "eye opener" for students who don't fully understand the reality of balances, minimum payments, and interest charges facing people who use credit cards. (An alternative is http://www.themint.org/teens/debt-calculator.html which has a simplified version of this activity.)
o Next, have the students visit "Teens: Are You Ready for a Credit Card?” (http://www.creditcards.com/credit-card-news/quiz/are-you-ready-to-handle-a-credit-card.php) to take a short quiz that will reveal how much they really know about credit cards. (Note: This quiz can be used as an informal assessment.)
· Students can also independently examine the changes made to credit card terms in “Student Handout 2: Credit Card Bill of Rights”.
· Also available for reference is a brochure, “How to Find the Best Credit Card” from http://publications.usa.gov/USAPubs.php?PubID=6138, available in English and Spanish that students can keep for personal reference.
Sources/Bibliographic Information that contributed to this lesson:
Carolan, Carol A. “The ABCs of Credit Card Finance.”The ABS of Credit.Center for Student Credit Card
Education, Inc. Web. 2013. 7 January 7 2015.
Chan, Andrew. “What the Credit Card Bill of Rights Means for Consumers.” Boston Globe.n.p., Web. 21 May
21 2009. 7 January 2015.
Student Handout 1: Checklist for Comparing Credit Cards
Directions: Research 3 credit cards online. Make sure that you select major credit cards, and not credit cards offered by a specific store. Complete this checklist to compare the features of the cards. Information about most of the features is given in thedisclosure box (the Schumer Box) that must appear in all printed credit card solicitations and applications. Complete the reflection questions that follow.Adapted from: http://publications.usa.gov/epublications/choosecard/checklist.htmFeature / Card A / Card B / Card C
Name of Card
What are the APRs?
For purchases?
For cash advances?
For balance transfers?
If you pay late?
What type of interest does the card have?
Fixed or variable?
How long is the grace period?
For late payments
What are the fees?
Annual
Late-payment
Over-the-credit-limit
What are the cash advance features?
Transaction fees
Limits
How much is the credit limit?
Limit
Does the card offer other features?
Rebates
Frequent flier miles
Other
Reflection Questions
1. What feature is most important to you when considering choosing a credit card and why?
2. Which card overall is the best choice and why? Make sure to include a comparison of at least 3 features.
Student Handout 2: Credit Card Bill of Rights
Directions: For each right, explain what the significance of this protection is to the consumer in the column labeled “Interpretation.” You may need to research the definition of some of the terms.
Right
/Interpretation
Creditors cannot increase the annual percentage rate (APR) during the first 12 months of opening up an account.Creditors are required to provide consumers with a 45-day advance notice of changes in rates and significant contract changes. Rates that change due to a change in the index that the rate is based on are excluded from this 45-day notice requirement.
Promotional rates need to be in effect for at least six months from the beginning date of that promotion.
Creditors need to provide a 30-day advance notice of an account closure.
With certain exceptions, credit card issuers are prohibited from charging a finance charge based on the double billing cycle method.
Creditors are prohibited from charging a fee on an outstanding credit card balance at the end of the billing period if the fee is attributed to the interest accrued on an outstanding balance that was fully repaid during that preceding billing period.
Consumers have the right to reject a new credit card after the creditor notifies a consumer reporting agency of its corresponding account.
Creditors are required to remove information provided to a consumer reporting agency about newly established credit card accounts if the consumer has not used or activated the account and if the consumer contacts the creditor within 45 days of its establishment to close it.
If two or more different APRs apply to different portions of an outstanding balance, the amount of any payment above the required minimum payment needs to be applied to the balance with the highest APR first and then to lower APR balances.
Creditors are required to provide a grace period for payments even if the cardholder takes advantage of a promotional rate balance or deferred interest rate balance.
Creditors are required to send credit card statements at least 21 days before the due date of the outstanding balance.
Creditors are prohibited from providing credit to consumers under age 18 (unless they are emancipated under state law, or the consumer's parent or legal guardian is designated as the primary account holder).
For college students who do not have a co-signer, the maximum amount of credit extended will be limited to the greater of 20 percent of the student's annual gross income or $500 dollars. The aggregate amount of credit extended from all of their credit cards will be limited to 30 percent of the student's annual gross income (for the recently completed calendar year).
Creditors are prohibited from opening a credit card account for any college student who does not have any verifiable annual gross income or already maintains a credit card account with that creditor, or any of its affiliates.
Creditors are prohibited from charging a fee to make telephone and web-based payments. However, a fee may be charged for expedited telephone payments made on the due date or the day before the due date.
Creditors are required to post their written credit card agreements on the internet.
Bill of Rights Obtained from:
Chan, Andrew. “What the Credit Card Bill of Rights Means for Consumers.” Boston Globe.n.p., Web. 21 May 21 2009. 7 January 2015.