Managing Your Credit & Debt

Activity 

Students work through the real cost of purchasing a DVD player with a credit card to determine the total paid with interest over a period of time.

So you want to buy that great new DVD Player and Surround Sound System with your new credit card?  It seems so easy?  Let’s see if it’s worth it.  Unfortunately, you do not have enough money to pay off the entire balance.  You decide to make payments of $50.00 per month.  Determine how much it will finally cost for the new DVD Surround Sound System.  It sounds great!

After you make a payment of $50.00, what will be your balance next month?  The next month, you again make a payment of $50.  Now what do you owe?  The next month, you again make a payment of $50.  Now what do you owe?  About how much do you think your total of all interest payments will be after you finally pay off the total balance with $50 payments each month? 

How long do you think it will take you to pay off the total balance (original purchase price and accumulated interest) with payments of just $50 per month? 

Procedures

1. Review the reasons for using forms of credit, especially credit cards.

2. Use the chart in “Choosing the Right Card” to illustrate the ways credit card offers differ and the advantages of each.  If possible, collect credit card application forms or make copies for students.  Review the application process and the required information.

3. Discuss the responsibilities and rights of credit users.  Contact the local office of the Consumer Credit Counseling Service, a non-profit agency, to talk to the class about credit use, problems and solutions.