# Grade 8 Mathematics FLBP Lesson 6 Credit Cards Financial Literacy Budget Project.

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Grade 8 Mathematics FLBP Lesson 6 Credit Cards Financial Literacy Budget Project

Cash or Credit  If you want to buy an item, you take the money and go to the store  As you get older and are employed you may have other options to paying for items  You may earn credit

Cash or Credit  Credit may be in the form of a loan  Credit may be with a credit card  Today we will discuss the use of credit cards and the true cost of using them

Credit Cards  You've probably seen credit cards before.  They are all about the same shape and size, and they usually have the name of a bank or credit card company and some numbers on them.  Someday you may get a credit card, and, when you do, you should know how to use it and how it works.

How Does a Credit Card Work?  If you have a credit card, the bank or credit card company has given you permission to borrow money from them.  When you buy something using a credit card, the credit card company or bank instantly loans you the money to buy what you want.

Credit Card Bill  The credit card company keeps track of all the purchases you make during the month.  Every month, they send you a bill for your purchases.  If you pay the full amount of the bill as soon as it comes, you usually won't have to pay interest.

What If You Don't Pay the Full Amount of the Bill?  If you cannot pay for the entire bill, the amount you cannot pay will be carried over to the next bill and added to the purchases you make in the next month.  You will also have to pay interest on the money you cannot pay.

Interest and Fees  Interest fees are one way the credit card company makes money.  Some credit card companies charge a fee every year for the privilege of using their card.  Credit card companies can charge late or no payment fees up to \$39 each month.

Credit Card Advice 1 1. Remember that you are borrowing money when you use a credit card! It is NOT a gift from anyone, and you have to pay the bill.

Credit Card Advice 2 2. A lot of adults have serious credit problems, often because of poor handling of credit card debt or medical bills - be responsible and don't let this happen to you.

Credit Card Advice 3 3. When you get credit card offers, which may start happening around your junior year of high school, talk to a parent to decide how to respond, if at all. (Make sure you read the entire offer.)

Credit Card Advice 4 4. Think about credit purchases as if you were buying with cash. If you cannot pay for it when the bill comes in less than a month, don't buy it.

Credit Card Advice 5 5. If you decide to have a credit card, choose one with no annual fee and at least a 25 day grace period between the day of the purchase and the day they start charging interest.

Credit Card Advice 6 6. Be sure to find out the interest rate if you choose or need to carry a balance. Interest rates vary among different credit cards, so you want to have the lowest possible rate.

Credit Card Advice 7 7. Debit cards are NOT CREDIT. Debit cards are linked directly to your checking account, so the money automatically come out of your checking. You must have the money available at the time of purchase to avoid overdraft fees.

How Much Do Things Bought with Credit Cards REALLY Cost?  When you buy things using a credit card there are different options about paying off the money you borrowed.  If you pay your entire bill each month, you usually won't have fees or pay interest, so you are not paying more for the item.

Minimum Payments  Often times, though, people do not have enough money to pay the entire bill each month, so they make minimum payments and are charged interest month after month.  You must make a payment every month.

Interest Costs  If you do not pay the entire amount due, interest will be added to what you owe.  Interest rates are different on every credit card. They can be 12% to 21% or more!  The interest ii added to your bill, so the cost of your purchases has just gone up. You end up paying more than the original price tag for your items.

The extra costs  Today we will explore the extra interest costs of credit card buying.  You will go to this website: http://senseanddollars.thinkport.org and play a “charge” game

Open the Quiz Preview ppt  You will need to have a copy of your quiz open before you start.  There is a table for you to use to input your purchase and record the results  Make sure you fill in each line of the table correctly before you answers the quiz questions for FLBP6 Quiz.

Select Charge

Select Play

Example - Go to the website. Fill in steps 1 and 2 Step 1 Select Item Step 1 Price 2 (APR) Annual % Rate 2) Pay Each Month # of Months to Pay off Ave. Monthly Finance Charge Total Finance Charge Total Cost of Item MP3 Player \$8918.0 %\$10 MP3 Player \$8925.0\$10

Example-Record the results on your assignment Step 1 Select Item Step 1 Price 2 (APR) Annual % Rate 2) Pay Each Month # of Months to Pay off Ave. Monthly Finance Charge Total Finance Charge Total Cost of Item MP3 Player \$8918.0 %\$1010.817.2796.27 MP3 Player \$8925.0\$10101.1610.4499.44 Compare the Step 1 Original Price to the Total Cost of Item after the Total Finance Charge. Is the MP3 worth the inflated price?

Finishing the Quiz – FLBP Lesson 6  Open the FLBP L6 Quiz Preview power point first  Answer the questions using the website information on a piece of paper  Open the Quiz in IQity when you are done, so you don’t time out  Click on the right answers that you wrote down  There are 10 quiz questions

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