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Subject Matter:
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Economics, Life Management Skills
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Grade Levels:
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11-12
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Time Allotment:
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One 60-minute class session
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Overview
As one of the largest groups of consumers in America, teenagers
know about spending money but have little understanding of the real
power of money, or, in contrast, the complexity of money and credit.
Credit cards are such an easy, convenient solution to money issues
that they can even seduce adults. Preparing teenagers to enter the
credit-card scene is extremely important because more than 80 percent
of teenagers and young adults have at least one credit card.
Learning Objectives
Students will be able to:
- Explain features of specific credit cards.
- Demonstrate an understanding of interest charges on credit cards.
- Calculate interest charges for a specific time period.
Oregon Standards Available at:
http://www.ode.state.or.us/cifs
Social Sciences - Economics
- Understand how money makes saving and borrowing easier.
- Understand a cost-benefit analysis of economic choices.
- Analyze and evaluate economic issues, problems and decisions
at local, national or international levels, considering economic
data, concepts and theories.
- Understand the purposes and functions of major international
economic organizations and the role of the United States in them.
- Understand how money functions in the banking system and as
part of fiscal policy.
- Understand the risks and benefits to the use of credit.
National Economic Standards From the National Council on Economic
Education
Standard #11 (http://www.economicsamerica.org/standards/cs11.html)
- The basic money supply in the United States consists of currency,
coins and checking account deposits.
- In many economies, when banks make loans, the money supply
increases; when loans are paid off, the money supply decreases.
- Select examples of money from a collection of pictures that
show coins, currency, checking accounts, savings account passbooks,
ATM cards and various types of credit cards and explain whether
each is considered money.
- Demonstrate how successive deposits and loans by commercial
banks, resulting from one new deposit in the banking system, cause
the money supply to expand and how repayment of loans causes the
money supply to contract.
Standard #12 (http://www.economicsamerica.org/standards/cs12.html)
- An interest rate is a price of money that is borrowed or saved.
- Like other prices, interest rates are determined by the forces
of supply and demand.
- The real interest rate is the nominal or current market interest
rate minus the expected rate of inflation.
- Higher real interest rates provide incentives for people to
save more and borrow less. Lower real interest rates provide incentives
for people to save less and borrow more.
- Real interest rates normally are positive because people must
be compensated for deferring the use of resources from the present
into the future.
- Riskier loans command higher interest rates than safer loans
because of the greater chance of default on the repayment of the
risky loan.
- Higher interest rates reduce business investment spending and
consumer spending on housing, cars and other major purchases.
Policies that raise interest rates can be used to reduce these
kinds of spending, while policies that decrease interest rates
can be used to increase these kinds of spending.
Media Components
Video
Check the link at http://www.opb.org/edmedia/trs/
to find access to the video(s) from unitedstreaming™ referenced
in this lesson plan.
- "Credit and Credit Cards" (22:00)
- Clip: "Proceed with Caution: Welcome to the
World of Credit and Credit Cards!" (01:02)
- Clip: "The Horror of Bad Debt" (00:53)
- Clip: "Viewing Your Credit Line as Spendable
Income" (01:45)
- Clip: "Interest Rates" (03:16)
- Clip: "Fees Can Hurt" (00:37)
- Clip: "Pitfalls and Blunders" (02:56)
Web
- "Virtual Shopping"
This site will allow students to look for their favorite need
or want and find a price for their items.
http://shopping.yahoo.com/
Prep for Teachers
Prior to teaching this lesson, bookmark all of the Web sites used
in the lesson on each computer in your classroom.
Download the video clips onto the computer you will use to project
the clips. Be certain each computer in the classroom has a copy
of the free Windows Media Player installed (some clips aren't available
for use with QuickTime Player). Also download Flash at http://www.macromedia.com/downloads/
and Shockwave at http://sdc.shockwave.com/shockwave/download/download.cgi?
P1_Prod_Version=ShockwaveDirector&P5_Language=English
Download a copy of the “Shopping For Credit” exercise
at http://www.practicalmoneyskills.com/english/students/lesson.php?id=130.
When using media, provide students with a Focus for Media Interaction,
a specific task to complete and/or information to identify during
or after viewing of video segments, Web sites or other multimedia
elements.
Materials
Per Student:
- Use of a computer with Internet connectivity
- Copies of worksheets for each student
- 1 3-ring binder for each student to create a "Personal
Financial Portfolio"
Introductory Activity
Step 1: Explain to the students that they are going to create
their own Personal Financial Portfolios. Unlike a financial portfolio
in the financial world, this is an informational portfolio full
of items of importance to the students, such as terms, concepts,
ideas and procedures they can apply to understanding their first
financial portfolio involving their own money. They can take this
information with them upon graduation and keep it as they proceed
down the road of life to fiscal self-determination. Ask the students
to indicate whether they have a credit card in their name, have
a credit card in their parents' name or have had some other type
of credit-card experience. Ask students if they are responsible
for the bills. If there is a student in the group with their own
credit card, ask that student about any fiscal policy that they
are operating under to control spending. For example, they have
a limit on the card amount, they can't spend over a certain dollar
amount for any one purchase, they can't spend more than a certain
dollar amount in a given time period, etc. So, what's the big deal
about credit cards? As a Focus for Media Interaction, students
should indicate in their financial portfolios how many teenagers,
according to the video clip, have a credit card and how many have
more than one. Students should also write down the average balance
a teenager carries on their credit card. Play the video clip,
"Proceed with Caution: Welcome to the World of Credit and Credit
Cards" (01:02), from the video, "Credit and Credit Cards"
(22:00).
Step 2: After viewing the video clip, discuss with students
ways that they use credit. As a Focus for Media Interaction,
students should indicate in their Personal Financial Portfolios
how long bad credit stays on your records and under which circumstances
people check your credit. Play the video clip, "The
Horror of Bad Debt" (00:53), from the video, "Credit and
Credit Cards" (22:00).
Learning Activities
Activity 1
Step 1: Tell students that they are going to do an activity
that requires them to compare credit cards using very important
information about credit cards. As a Focus for Media Interaction,
have students complete the "Shopping for Credit" Worksheet
(Student Pages – Teens – Lesson 8 – Credit Cards
Page 1) previously downloaded at http://www.practicalmoneyskills.com/english/students/lesson.php?id=130.
Students can use this sheet to compare a number of credit cards
at http://www.cardweb.com/cardlocator/.
Choose one of the monthly credit-card surveys to view information
pertaining to different card types. Direct students to compare one
credit card from the low-rate survey and another credit card from
the standard survey. Emphasize that they should be examining credit
cards that they already hold or ones that they would like to have
in the future. Punch holes in these comparisons so students can
place them in their 3-ring binders.
Step 2: Tell students that they have just completed a comparison
of credit cards, but that they probably encountered a lot of unfamiliar
terms. In the video clip students are about to view, the characters
talk about a line of credit. As a Focus for Media Interaction,
have students predict what they think a line of credit for a teenager
their age may be. Play the video clip, "Viewing Your
Credit Line as Spendable Income" (01:45), from the video, "Credit
and Credit Cards" (22:00). Upon completion of the video clip,
discuss with students their predictions of the meaning of the term
"line of credit."
Step 3: Tell students that being an informed consumer means
that they will know how much interest the credit card company will
charge. Learning to find this information is easy once you know
how. As a Focus for Media Interaction, have students identify
the difference between a credit card and a debit card and write
a two-paragraph essay in their Personal Financial Portfolios. Play
the video clip, "Interest Rates" (03:16), from the video,
"Credit and Credit Cards" (22:00).
Step 4: Provide students with the handout Activity 8-3a (Student
Pages – Teens – Lesson 8 – “How much will it
really cost” Page 3) which is available in PDF format at http://www.practicalmoneyskills.com/english/students/lesson.php?
id=131&ids=120:121:122:123:124:125:126:127:128:129::130:131:132:133.
Have students complete the calculations. Give students approximately
15 minutes and then complete the calculations as a group on the
whiteboard or chalkboard. (The key to this activity should be downloaded
from the same source.) An explanation of terms will be required
and students should be taking notes for their Personal Financial
Portfolios. Punch holes in these comparisons so students can place
them in their 3-ring binders.
Activity 2
Step 1: Tell students that they are two days late paying
their credit-card bill of $115.00. Their interest rate is 12.9%.As
a Focus for Media Interaction, have students predict how
much it will cost them to be late on their bill and write it down
in their Personal Financial Portfolio under the heading "late
fees." Play the video clip, "Fees Can Hurt"
(00:37), from the video, "Credit and Credit Cards" (22:00).
After viewing the video clip, have the students compare what they
thought they would be charged to what the video revealed as the
true charges for being one day late.
Step 2: Explain to students that their credit card represents
them and their financial status in the world. Unfortunately, there
are some very bad things that can happen if you lose your credit
card. As a Focus for Media Interaction, have students create
a list of ways they can protect their credit cards and credit-card
identity and place it in their Personal Financial Portfolios. Play
the video clip, "Pitfalls and Blunders" (02:56), from
the video, "Credit and Credit Cards" (22:00). Review students'
lists and create a unified list on the whiteboard.
Culminating Activity
Students will go on a “virtual” shopping trip at Yahoo
Shopping at http://shopping.yahoo.com/
and choose 10 items. Students must write down in their Personal
Financial Portfolios the 10 items and then calculate the monthly
payment for their purchases using 14.5% APR for the first five items
and 21% APR for the second five items. As a Focus for Media Interaction,
have students complete the interactive credit-card calculator at
http://www.practicalmoneyskills.com/english/resources/calculators/calc_creditcard.php.
Students should write a paragraph examining the issues of monthly
payments and the ease with which these payments conceal the amount
of interest they are truly paying.
Cross-Curricular Extensions
Math
- Have students calculate the amount of money they could have
saved if they saved up for a stereo priced at $1,000 versus purchasing
it immediately using a credit card. The credit-card rate is 22%
and you plan to pay off the credit card in 3 years.
History/Art
Business/Career
- Write an essay depicting the various career paths and jobs available
in the credit-card industry. In particular, how has the credit-card
industry affected business practices worldwide?
Community Connections
- Invite a local businessperson into the classroom to discuss
the credit-card industry and how credit-card use affects their
business. This discussion should include the positive and negative
issues surrounding credit cards from their perspective.
- Visit a local bank to discuss credit cards/debit cards and how
that has changed the banking industry. Discuss with the banker
the percentage of banking done by credit/debit card versus checking
in today's world.
- Invite a local person who has had credit-card problems (i.e.
stolen card, lost card) to visit your class and discuss the difficulties
they encountered after losing a credit card.
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