Credit Card Lessons for High School Students
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This document provides a lesson on credit cards for high school students. It explains how credit cards work similarly to Ram borrowing a pencil from his friend Neeta with the expectation that it will be returned. It notes that credit cards allow you to borrow money from a bank when making purchases, with the expectation that the amount will be repaid within a certain number of days, usually 30 days. If the amount is not repaid, interest is charged. It gives examples of how interest compounds if the full amount is not repaid over time. It shows that if only the minimum payment of 5% is made each month, it can take over 25 years to repay the full amount borrowed and one would end up paying over 3 times the original
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Credit Card Lessons for High School Students
- 1. Credit Card Lesson for High School Students
- 2. Ram is writing an Exam and his pencil broke
- 3. Ram borrows a pencil from his friend Neeta What is the expectation from Neeta?
- 4. Neeta will expect that Ram will return the pencil the next day How many pencil/s will Ram have to return ?
- 5. Neeta will expect only one Pencil And they become good friends What would have happened if Ram hadnt returned the pencil?
- 6. Neeta would be angry with Ram Not only that, she will be telling every other friend about Ram No one will likely to give any thing to Ram
- 7. Credit Card works similar You go to a shop, buy some thing and no money with you The bank is your friend and gives you money when you are in need But, Bank does not give it to you, but gives to shop keeper on behalf of you Whatever you borrow, you will have to return in 30 days (or some time less number of days)
- 8. If you dont return Banker becomes angry He not only tell other banks not to give you any more money, but also charges interest
- 9. What is the formula for applying interest? A = P (1+r)n Banker will charge interest in months and not years Every month upto 3% interest will be charged if money is not returned
- 10. If your borrow Rs 100 on credit Card? What is the interest for one month if the money is not returned on due date, interest rate charged is 3%? Rs 3 What is the interest if money is not returned even after 2 months, interest rate charged is 3%? Rs 3 Or Rs 3.09
- 11. What if you dont return for 1 year Month Borrowed Interest @ 3% if money not returned by end of month Total loan 1 Rs 100 Rs 3 Rs 103 2 Rs 3.09 Rs 106.09 3 Rs 3.18 Rs 109.27 4 Rs 3.28 Rs 112.55 5 Rs. 3.38 Rs 115.97 6 Rs 3.48 Rs 119.40 7 Rs 3.58 Rs 122.98 8 Rs 3.69 Rs 126.68 9 Rs 3.80 Rs 130.47 10 Rs 3.91 Rs 134.39 11 Rs 4.03 Rs 138.42 12 Rs 4.15 Rs 142.58
- 12. What is the actual interest Rate? Amount Borrowed : Rs 100 Amount Repaid : Rs 142.58
- 13. 42.58% Thats a lot of interest and thats what people who borrow on credit card pay
- 14. Credit Cards offer you an interesting option Pay only 5% of the loan What happens if you pay only 5% of the loan?
- 15. Use a Spreadsheet to find out Month Amount Borrowed 5% Repaid Balance Loan 3% Interest Loan Balance Total amount paid 1 100 5 95 2.85 97.85 232.4113643 2 4.89 92.96 2.79 95.75 3 4.79 90.96 2.73 93.69 4 4.68 89.00 2.67 91.67 5 4.58 87.09 2.61 89.70 6 4.49 85.22 2.56 87.77 7 4.39 83.39 2.50 85.89 8 4.29 81.59 2.45 84.04 9 4.20 79.84 2.40 82.23 10 4.11 78.12 2.34 80.47 11 4.02 76.44 2.29 78.74 12 3.94 74.80 2.24 77.04 13 3.85 73.19 2.20 75.39 14 3.77 71.62 2.15 73.77 15 3.69 70.08 2.10 72.18 16 3.61 68.57 2.06 70.63 17 3.53 67.10 2.01 69.11 18 3.46 65.65 1.97 67.62 19 3.38 64.24 1.93 66.17 20 3.31 62.86 1.89 64.75
- 16. Yes, it takes more than 300 months or 25 years to repay if you pay only 5%
- 17. Exercise Using Spread sheet If you borrow Rs 1000 on your credit card, which charges 3% interest every month and you pay only 10% of the loan outstanding, how many month will it take to repay Rs 1000 and how much will you repay totally?
- 18. Now that you have the knowledge of credit card, you can experiment credit card in the game
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