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Credit Edit


Module objectives: Edit

In this module, students will learn about credit. They
will learn about what credit cards are, how they work,and how they can be responsibly managed. They willalso learn about credit ratings and loans.


At the end of this module, your students will be able to:
Explain what a credit card is and how it works
Explain what a loan is
Explain how interest worksExplain what a loan isExplain what identity theft is.


Concepts to cover:
This module will teach basic concepts about creditand loans.


Math standards covered in this module include: Edit


Develop a deeper understanding of very large and very small numbers and of various representations of them • judge the effects
of such operations as multiplication, division, and computing powers and roots on the magnitudes of quantities • develop fluency
in operations with real numbers, vectors, and matrices, using mental computation or paper-and-pencil calculations for simplecases and technology for more-complicated cases • judge the reasonableness of numerical computations and their results.

Social studies standards covered in this module include: Edit


Ig. construct reasoned judgments about specific responses to persistent human issues; IVh. work independently and cooperatively
within groups and institutions to accomplish goals; Vc. describe the various forms institutions take, and explain how they develop
and change over time; Vf. evaluate the role of institutions in furthering both continuity and change; Vg. analyze the extent to
which groups and institutions meet individual needs and promote the common good in contemporary and historical settings;
VIa. examine persistent issues involving the rights, roles, and status of the individual in relation to the general welfare; VIg.
describe and analyze the role of technology in communications, transportation, information-processing, weapons development,
or other areas as it contributes to or helps resolve conflicts; VIId. describe relationships among the various economic institutions
that comprise economic systems such as households, business firms, banks, government agencies, labor unions, and corporation;
VIIe. analyze the role of specialization and exchange in economic processes; VIIg. compare basic economic systems according
to how rules and procedures deal with demand, supply, prices, the role of government, banks, labor and labor unions, savings
and investments, and capital; X. identifies and practice selected forms of civic discussion and participation consistent with theideals of citizens in a democratic republic.

  Edit

Borrow
When a person receives something but is expected to pay it
back. When the person borrows from the bank, she will bereturning the same amount plus interest. Generally speakingof money.


Credit
Amount of money at a person’s disposal for purchasing ofgoods or services. The person must pay it back within aspecified or pre-arranged time line.


Credit cardA tool issued that allows you to make purchases within yourcredit limit.

Credit ratingA trust developed in you that you will pay back loans andcredit card debts faithfully that is based on your credit history.

Identity theft
A crime that occurs when someone uses your personal informationwithout your permission to commit fraud or othercrimes.


Interest
The amount of money that one pays for the money that
was borrowed, or the amount of money that the financialinstitution pays the shareholder or customer for maintainingtheir money with said institution.


Interest rateThe percentage that is charged for the money that isborrowed, usually set at a yearly rate.


lend
Money that is given to someone for their use, with theknowledge that they will return that money with interestand within a specified period of time.


loan
Taken by a person or individual with the purpose of obtaininggoods or services. The money borrowed will be repaid withan additional fee and within a specified period of time.


props/supplies:
• Worksheets• Credit Card

Lesson: credit

Begin lesson by holding up a credit card and a debit card. Tell students that even though thesecards look very similar, they are actually very different. Ask students if they can tell you how creditcards and debit cards are different.

Draw a brain map on the board to illustrate how the
conversation progresses. Start with a central bubble in the
middle (what is credit?) with lines and bubbles leading outfrom it including other concepts and ideas we will cover inthe discussion.

After getting answers from your students, fill in any gapsthat remain.

Explain that:


->When you use a debit card, the money comes directly
out of your checking account. You can use your debit
card for the amount of money that you have in your
account. When you use a credit card, you are given acredit limit. This is the amount of money you can chargeto your credit card.


->To decide what your credit limit is, the bank looks at
your credit rating. A credit rating is determined by
looking at whether someone paid all of his or her bills
on time as well as by looking at the amount of money
someone makes every month. From this, the credit
card company decides how much money will be used
for your credit card limit. If they decide that you can payback $400.00 a month, then they put your credit limit at$400.00 and give you a credit card limit.

->Credit cards are NOT free money! If you charge $300.00on your card, then you have to pay that money back.


->Credit card companies make money by charging an
Annual Percentage Rate of interest. This means that
if you don’t pay all of the money back at the end of the
month, then the credit card company will add interest
onto the amount you owe, which will mean that you oweeven more money.


[1]

-->Ask students if they know about the crime of identity theft.


• Explain or field answers from students concerning
this issue.
• Explain that identity theft can occur when someone
goes through records from their employer, hacks into
the organization’s computers, goes through your trash,
or steals your mail or wallet.
• Explain to students that they can avoid identity theft by
not giving out personal information such as your SSN,
mother’s maiden name, or account numbers over the
phone or the internet unless you know the information
is secure, and keeping license numbers, social security
card numbers, and credit card numbers safe and private.
• If someone does become a victim of identity theft,
they should contact a nationwide consumer reporting
agencies place “fraud alerts” in your file to let potential
creditors and others know that you may be a victim ofidentity theft.

This is a lot of information for your students to absorb.

->After you’ve gone through the basics of credit cards, askyour students if they or their parents have credit cards.

->Ask them if they knew how credit cards actually worked.Then, go through a credit card activity together.

->Ask your students if they can think of anything they wishthey could buy.


Take one student’s example of what they’d like to buy and
figure out how much it would actually cost them to buy ifthey used a credit card.


for instance, you might write on the boardthe following:

New bike: $400.00

APR interest: 21%


Say you paid back the bike in one year. That means that youwould have to pay back the $400.00 you charged on thecredit card, plus 21% interest:


$400.00 x 21%400 x 0.21 = 84$84.00 is your interest


That means that you actually owe $484.00 for your bike.
However, if it takes you more than a year to pay back your
bike, it will actually be more than that, because the APRwill add up if it takes longer for you to pay back the card!

Notes:

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HOPE Corps volunteer tip: By using students’ everyday experiences, such as shopping with their family, teachingfinancial concepts will be easier.


HOPE Corps volunteer worksheet: give me some credit! Edit


You can either have your students do this worksheet as a large group activity or have them split
up into groups. Either way, make sure to go over the answers together to make sure that they’reon track with their answers. You can have students shout out the answers to make the activitymore interactive.

answer key:


1. 1) Mark each of the following statements True (T) or
False (F). Gabe and Joy answered the first statement, but
they need your help!
F You don’t ever have to pay back a credit card.
T Your credit rating will be better if you pay your bills on time.
T If it takes you longer to pay your credit card bill, you will
have to pay more money back.
F It’s smart to always charge items on your credit bill.
T An emergency is a good time to use a credit card.
F Once you get a credit card, you should buy
anything you want.
T The credit company looks at how much money you
make when deciding what your credit limit will be.
T Your credit limit is the amount of money you are allowed
to charge every month on your credit card bill.F If you don’t pay your credit card bill, you can still chargehowever much money you want on your credit card.

.......................................................................................


2. You’re thinking about charging a sofa to your credit
card. It will take one year to pay back the sofa. If the sofa
costs $850.00, and your APR interest is 17%, how much
will the couch cost after you pay back the credit card,including interest?$994.50

...................................................................................


3. Your dad is thinking about putting this painting on his
credit card. He’s decided that it will take him 1 year to pay
the credit card bill. The painting is $2500.00. The APR
interest is 15%. If it takes him 1 year to pay it back, howmuch will the painting cost in all?$2875.00

...................................................................................


4. Would you charge items to a credit card if it means
you will pay back more money than the item you bought
is worth? Why or why not?Answers will vary

.....................................................................................

Give me some credit! Edit

1. Mark each of the following statements True (T) or False (F).Gabe and Joy answered the first statement, but they need your help!


---F--Your credit rating will be better if you pay your bills on time.


If it takes you longer to pay your credit card bill, you will have      to pay more money back.----

It’s smart to always charge items on your credit bill.---- An emergency is a good time to use a credit card.---- Once you get a credit card, you should buy anything you want


The credit company looks at how much money you make whendeciding what your credit limit will be.


Your credit limit is the amount of money you are allowed tocharge every month on your credit card bill.


------If you don’t pay your credit card bill, you can still charge howevermuch money you want on your credit card.

[2]


..................................................................................................................................

2. You’re thinking about charging a sofa to your credit card. It will take one year topay back the sofa. If the sofa costs $850.00, and your APR interest is 17%, how muchwill the couch cost after you pay back the credit card, including interest?

..................................................................................................................................


3. Your dad is thinking about putting this painting on his credit card. He’s decided
that it will take him 1 year to pay the credit card bill. The painting is $2500.00.The APR interest is 15%. If it takes him 1 year to pay it back, how much will thepainting cost in all?

..................................................................................................................................


4. Would you charge items to a credit card if it means you will pay back moremoney than the item you bought is worth? Why or why not?

..................................................................................................................................

After you’ve gone through the credit card section proceed to the loan section of this session.

Use the following questions and prompts to direct the conversation:

->Have they ever lent friend money, or has a friend, sibling,or parent ever loaned someone money?

->What is a loan?


->Why do people take out loans? (Students should say
something to the effect that people take out loans when
they have to pay for something that’s really expensivebut don’t have the money in their pocket or in their bankaccount to pay for that item).

->What kinds of expensive items do people takeloans out for?

->Ask students if they know why banks chargeinterest for loans.

[3]


Finish this discussion by helping the students go through
an example of how much more a house will cost with
interest. Tell the class that you know that a friend recently
bought a house for $700,000.00. He took out a loan for
the house, and he is now paying back a 4% interest rate
on the loan. It will take the friend 25 years to pay back theloan. Help the students figure out how much the interestwill cost over 25 years.


First have students figure out how much interest will bepaid for one year:$700,000 x .04 = $28.000

Then figure out how much interest will be paid over 25 year:$28,000 x 25 = &700,000

This means that over 25 years, the friend will pay as muchin interest as he will for the house.


Talk to students about why someone would take out a loan
when they would have to pay back so much interest (help
students to understand that this is the only way that mostpeople can afford to buy large ticket items, such as homes).

HOPE Corps volunteer worksheet: taking an interest Edit


answer key (actual worksheet on the following page):


1. Your family is going to buy a new car. The car costs
$22,550.00. Your family is going to take out a car loan from
the bank. The interest rate is 6%, and it will take your family
5 years to pay off the car. How much will the interest cost
on the car?$6,765.00

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2. How much will the car cost in all (interest + cost of car)?$26,765.00

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3. Your cousin’s family has a home loan for their house.
The house costs $528,000. Their interest rate is 5%. It will
take your cousin’s family 30 years to pay off the loan. How
much interest will they pay over 30 years?$792,000.00

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4. How much will the house cost in all (interest +cost of house)?

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notes:

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  Edit

1. Your family is going to buy a new car. The car costs
$22,550.00. Your family is going to take out a car loan from
the bank. The interest rate is 6%, and it will take your family5 years to pay off the car. How much will the interest coston the car?

........................................................................................


2. How much will the car cost in all (interest + cost of car)?........................................................................................


3. Your cousin’s family has a home loan for their house.
The house costs $528,000. Their interest rate is 5%. It willtake your cousin’s family 30 years to pay off the loan. Howmuch interest will they pay over 30 years?

........................................................................................
4. How much will the house cost in all(interest + cost of house)?

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you can make your calculations here:


  Edit

Have students split up into groups of 4 to 5. Explain that by answering a question correctly, each
team will get to draw an Earn it! Card from the pile that you’re holding. The questions are drawnfrom material that they’ve learned in the lesson that day.

questions:

1. What is a credit rating?A trust developed in you that you will pay back loans andcredit card debts faithfully that is based on your credit history.

............................................................................................
2. What is a credit card?A tool issued that allows you to make purchases withinyour credit limit.

............................................................................................
3. What is a loan?
Money taken out by a person or individual with the purpose
of obtaining goods or services. The money borrowed willbe repaid with an additional fee and within a specifiedperiod of time.

............................................................................................
4. Your dad bought a bike for $498.00. He put it on his
credit card. The APR is 20%. How much will the bike cost ifyour dad pays off the card in a year?$597.60

............................................................................................
5. Your brother loans you $250.00. He says he’s going to
charge you $5.00 in interest for every month it takes you to
pay back the loan. If you pay the loan back in five months,how much money do you have to pay back?$275.00

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6. Why do people take out loans?
People take out loans because they don’t have enoughmoney in their pocket or in their checking accounts to payfor that item in full on their own.

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7. How do you get a good credit rating?A good credit rating comes from having a dependableincome and paying your bills on time.

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8. What is a credit limit?
A credit limit is the amount of money you are allowedto charge on your credit card, as determined by yourcredit rating.

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9. Your parentsbought a house for $100,000. The interest
rate on their loan is 5%. It will take them 20 years to payback the loan. How much is the interest on this house?$100,000

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10. How much will the house cost in all, including interest?
$200,000HOPE Corps volunteer tip: When playing a game, encourage good sportsmanship in your class

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-->HOPE Corps volunteer tip: When playing a game, encourage good sportsmanship in your class.

  Edit

When a student group answers a question correctly, they can come up and take one of thefollowing cards. Have them read the card aloud.

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