Charge It?

About the Experiment

Credit cards are convenient and can be great tools if used wisely. But it’s important to understand how they work and their potential pitfalls. This activity introduces the cost of using credit by showing kids the real amounts that the same item costs when it’s paid for in different ways.

Topic: Financial Literacy
Grades: 7 – 12
Estimated Time: 25 Minutes
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What You'll Need

What to Do

1. On the “What Does it Really Cost?” chart (found on page 3 of this PDF), begin with the first section, “Buying Wireless Headphones.”
2. For each line, multiply the dollar amount by the number of months to determine how much each person really paid for their wireless headphones, and enter that in the first column.
3. Then subtract the original amount of $200 from the total amount paid to determine how much each person paid in interest. Enter that amount in the “Dollar Cost of Using Credit” column.
4. For the next activity, “Buying Sports Equipment,” calculate the total amount paid when using each option.
5. In Option 3 and Option 4, subtract the original amount of $200 from the total amount paid to determine how much each person paid in interest.

Questions to Engage Youth

• Some purchases are so big that people usually have to use credit
  for them. Can you give some examples?
• Do you think you should have a credit card at your current age?
  Why or why not?
• What is a good age to get a first credit card?
• What would you use a credit card for?
• What might happen if you can’t make a credit card payment on time?

Explanation

Credit makes buying things—or paying for experiences, like tickets to a festival—quick and easy. But borrowing money costs money. If you don’t pay off your purchase in full by the first due date, it’s going to cost you more than the original price. Your credit card experience can vary greatly depending on factors like the interest rate, and whether you keep a running balance or pay it off in full.