1. Credit Cards and Pay Day Loans

2. Aims and objectives Aim: Promote understanding of the hidden charges associated with credit cards and pay day loans. Objectives: Paraphrase the difference between interest rates and APR. Calculate the fixed interest rate for four credit cards with a set transfer amount. Calculate the interest rate for four pay day loan companies with a set loan amount. Calculate the APR incurred on two credit cards. Calculate the possible APR incurred on two pay day loans. Compare and contrast credit cards and pay day loans.

3. Interest and APR What is meant by fixed interest? The fixed interest rate is what you will pay on top of the loan/ balance transfer amount you require, regardless of how long you owe the money for. What is the APR? (annual premium rate) A percentage of the outstanding balance each month, divided by 12 months and then added to your monthly total. Still not sure? – Why not look on the internet to find out more information, once you have done this, write out a sentence or two explaining it to yourself. This will help you to remember.

4. Calculating whole number percentages… Divide by 100, then multiply by the % you need…. Example 25% of £150 would be written as: 150 / 100 = 1.5 x 25 = £37.50 Check yourself using a calculator! So £37.50 is 25% of £150.

5. Calculating using decimal percentages… Just do the same but remember your decimal point! Divide by 100, then multiply by the % you need…. Example 2.9% of £150 would be written as: 150 / 100 = 1.5 x 2.9 = £4.35 Check yourself using a calculator! So £4.35 is 2.9% of £150.

6. Task 1 Calculate the total amount payable if you were to take a balance transfer amount of £250 for each of the credit cards displayed on your Credit Card & Pay Day Loan worksheet. Allow yourself 20 minutes to complete all calculations, show your workings out!

7. Task 2 Calculate the total amount payable if you were to take a loan amount of £250 for each of the Pay day loan companies displayed on your Credit Card and Pay Day Loan Worksheet. Allow yourself 20 minutes to complete all calculations, showing clearly your workings out.

8. Task 3 Compare and contrast the interest rates (only) with a set loan/balance transfer amount of £250. Please display your findings in a dual pie chart. You may use Excel if you find this easier.

9. Task 3 Calculate the APR with the balance transfer of £250 for two credit cards of your choice. You have 5 minutes to complete your calculations. Please ensure you display all workings.

10. Task 4 Calculate the APR with a loan amount of £250 for two Pay Day Loan of your choice. You have 5 minutes to complete your calculations. Please ensure you display all workings.

11. Pie Charts – hint! Hint – your whole one (or 100%) is how many degrees?