Math & Science Gumbo

Credit Card Enrichment

Overview of Lesson

Students learn about credit cards and the cost of interest associated with their use.

Goal

Students will understand the costs associated with using a credit card.

Objectives

Students will compute the cost of charging a set amount of dollars.
Students will understand how credit card debt increases over a period of time.

Ohio Academic Content Standards

Mathematics
Patterns, Functions and Algebra (Grade 5-6)

Benchmark B:
Represent, analyze and generalize a variety of patterns and functions with tables, graphs, words and symbolic rules.

Benchmark J:
Use formulas in problem-solving situations.

Indicators:
Grade 5
5. Model problems with physical materials and visual representations, and use models, graphs and tables to draw conclusions and make predictions.

Grade 6
1. Represent and analyze patterns, rules and functions, using physical materials, tables and graphs.

Mathematics
Data Analysis and Probability (Grade 6)

Benchmark E:
Collect, organize, display and interpret data for a specific purpose or need.

Indicators:
6. Make logical inferences of statistical data.

Materials

Student worksheet

Procedure

Introduce the concept of credit cards.
Discuss credit terminology, including balance, interest, principal, credit and debit.
With a beginning balance of $100, have the students compute charges with an annual interest rate of 24 percent (or 2 percent per month):

Beginning balance = $100
Monthly interest rate = 2%
Monthly interest charge = $2 (100 x 2%)
Ending balance = $102
Minimum payment due = $12 ($10 principal, $2 interest)

New beginning balance = $90 ($102 - $12)
Monthly interest rate = 2%
Monthly interest charge = $1.80 (90 x 2%)
Ending balance = $91.80
Minimum payment due = $10.80 ($9 principal, $1.80 interest)

Develop a table – continuing the pattern until the balance is below $40.

Evaluation

Determine the percentage of accurate answers on each student’s worksheet.

Student Worksheet (With Answers)

Beginning Balance	Interest Rate (monthly)	Interest Charge (beginning balance times 2 percent)	Principal (beginning balance times 10 percent)	Ending Balance (beginning balance plus interest)	Minimum Amount Due (principal plus interest)	New Balance (ending balance minus amount due)
$100	2%	$100 x .02 = $2	$100 x .10 = $10	$102	$10 + $2 = $12	$102 - $12 = $90
$90	2%	$90 x .02 = $1.80	$90 x .10 = $9	$91.80	$9 + $1.80 = $10.80	$91.80 - $10.80 = $81
$81	2%	$1.62	$8.10	$82.62	$9.72	$72.90
$72.90	2%	$1.46	$7.29	$80.19	$8.75	$71.44
$71.44	2%	$1.43	$7.14	$72.87	$8.57	$64.30
$64.30	2%	$1.29	$6.43	$65.59	$7.72	$57.87
$57.87	2%	$1.16	$5.79	$59.03	$6.95	$52.08
$52.08	2%	$1.04	$5.21	$53.12	$6.25	$46.87
$46.87	2%	$0.94	$4.69	$47.81	$5.63	$42.18
$42.18	2%	$0.84	$4.22	$43.02	$5.06	$37.96
$37.96

Credit: Money from a bank or other lending institution that is available for someone to borrow.

Debit: The payment subtracted from the balance of a loan.

Balance: The remainder of a loan after a payment has been made. The difference between the totals of the credit and debit sides of an account.

Principal: The original amount of a debt (loan) on which the interest is calculated.

Interest: A fixed charge for borrowing money; usually a percentage of the amount borrowed.