Credit Cards: Friend or Foe? Script

Warm-Up: Credit Card Brainstorm (4 minutes)

"Good morning, everyone! Welcome back. Last time, we started exploring credit cards and learned about debit versus credit. We even looked at a credit card statement. To get us started today, I want you to quickly brainstorm: What key credit card terms or concepts do you remember from our last session? Just jot down whatever comes to mind.


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(Allow 1 minute for individual brainstorming.)

"Alright, let's hear some of your thoughts. What are some of those key terms or ideas that you recall? I'll write them on the board as you share." (Facilitate a quick share-out, writing keywords on the board.)

Review & Deep Dive into Responsible Use (6 minutes)

"Excellent! We've got terms like 'APR,' 'credit limit,' 'minimum payment,' and 'credit score.' Today, we're going to build on that foundation and really understand how to use credit cards wisely, making them a friend rather than a foe. We'll specifically focus on the real cost of borrowing money. Let's look at our slides to guide us."

(Display Slide Deck: Credit Cards - Slide 1: Credit Cards: Friend or Foe?)

(Display Slide Deck: Credit Cards - Slide 2: Credit Card Basics: A Quick Review)

"As a quick refresher, remember a credit card allows you to borrow, while a debit card uses your own money. We also saw that credit card statements detail your purchases, payments, and any interest charged. Today, our main focus is making smart financial choices. Specifically, understanding the difference between paying your bill in full and just making the minimum payment."

"So, how do these 'borrowing' mechanics actually work?"

(Display Slide Deck: Credit Cards - Slide 3: How Do Credit Cards Work?)

"There are a few important terms to understand. First, your credit limit is the maximum amount of money the bank will let you borrow. Your interest rate, often called APR, is the cost you pay for borrowing that money, usually a percentage of the amount you owe. If you don't pay off your entire balance each month, you'll be charged interest. The minimum payment is the smallest amount you must pay each month to keep your account in good standing, but paying only the minimum can lead to a lot of interest over time. Finally, the billing cycle is simply the period of time your transactions are recorded, usually about a month."

"Alright, let's explore why someone might want a credit card. What are the good things about them?"

(Display Slide Deck: Credit Cards - Slide 4: Credit Card Advantages)

"Credit cards offer a lot of convenience. They're easy to use for online shopping or when traveling. They can be a lifesaver in emergencies, like unexpected car repairs. And that 'credit history' I mentioned? Building good credit is super important for your future – for renting an apartment, buying a car, or even getting some jobs. Many cards also offer rewards like cash back or airline miles, and they often come with fraud protection, which is a huge plus."

"But, like any powerful tool, there are also risks. What do you think some of the downsides or dangers of credit cards might be?"

(Display Slide Deck: Credit Cards - Slide 5: Credit Card Disadvantages)

"The biggest risk is debt accumulation. It's easy to overspend, and if you don't pay off your balance in full, those high interest rates mean you'll pay a lot more than what you originally bought. There can also be various fees, like annual fees or late payment fees, that add up. And if you don't manage your card well, it can seriously hurt your credit score, making it harder to borrow money in the future. Lastly, there's always a risk of identity theft if your card information falls into the wrong hands."

"So, how do we make sure credit cards are a friend and not a foe? It all comes down to responsible use."

(Display Slide Deck: Credit Cards - Slide 6: Responsible Credit Card Use)

"The golden rule is to pay in full every month. If you can do this, you avoid paying any interest. Always pay on time to avoid late fees and protect your credit score. Try to stay within your credit limit and avoid maxing out your card. It’s also crucial to monitor your statements for any unauthorized charges. And always understand the terms and conditions of your card – know your interest rate, fees, and grace period."

Activity: Pay in Full vs. Minimum Payment (10 minutes)

"Now, let's really put this idea of interest and payments into perspective. I have an activity for you called the Activity: Pay in Full vs. Minimum Payment. You'll work through a scenario to see the true cost of credit if you only make minimum payments. You can work individually or with a partner. Feel free to use a calculator. We'll discuss your findings in about 7 minutes."

(Allow 7 minutes for students to work. Circulate and assist.)

"Alright, let's come back together. What did you discover about Sarah's laptop purchase? What was the interest if she paid in full? And what did you estimate about paying just the minimum? Why does that happen?" (Facilitate discussion, emphasizing the power of compound interest and the importance of paying in full.)

Activity: Credit Card Scenarios (6 minutes)

"Great insights! Now, let's apply this understanding to a few more practical situations with our Activity: Credit Card Scenarios. We'll go through these as a class or in small groups. For each scenario, discuss the smartest financial decision and why."

(Transition to Activity: Credit Card Scenarios. Facilitate discussion for each scenario, keeping it concise.)

Cool-Down: My Credit Card Takeaway (4 minutes)

"Excellent discussions, everyone! To wrap up today, I want each of you to think about one key takeaway you learned about responsible credit card use today. What's the most important thing you'll remember or one piece of advice you'd give someone?


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(Collect responses or have students share briefly.)

"Thank you all for your active participation today. Understanding how to use credit cards responsibly is a vital step toward building a strong financial future!"

"(Optional Extension: If we have an extra few minutes, we could quickly discuss the Activity: Credit Card Choice Challenge to see how different cards suit different needs.)"

Credit Card Brainstorm

Instructions: Take one minute to jot down everything that comes to mind when you hear the phrase "credit card." Think about words, feelings, experiences, or any questions you have. There are no right or wrong answers!

Share your thoughts with a partner or the class!

Credit Card Scenarios

Instructions: Read each scenario below. Discuss with your group or class what the smartest financial decision would be regarding credit card use, and explain why.

Scenario 1: The New Phone

Maya wants to buy the latest smartphone, which costs $800. She has $200 saved up. She sees an offer for a new credit card with a $1,000 limit and decides to put the remaining $600 on it. She plans to pay it off over several months, only making the minimum payment of $25 each month.

Discussion Questions:

• Is this a wise use of a credit card? Why or why not?
  
  
  
• What are the potential consequences of Maya's plan?
  
  
  
• What would be a more responsible approach for Maya?
  
  
  

Scenario 2: Emergency Expense

Leo is a college student living on his own. His car suddenly breaks down, and the repair will cost $500. He only has $50 in his checking account. He has a credit card with a $1,000 limit that he rarely uses.

Discussion Questions:

• Should Leo use his credit card for the car repair? Why or why not?
  
  
  
• What should Leo's plan be to pay back the $500?
  
  
  
• How does this situation compare to Maya's (Scenario 1)?
  
  
  

Scenario 3: Rewards and Responsibility

Sophia uses her credit card for all her regular expenses like groceries and gas, totaling about $400 a month. She always pays her entire balance in full before the due date. Her credit card offers 2% cash back on all purchases.

Discussion Questions:

• Is Sophia using her credit card responsibly? Explain.
  
  
  
• What are the benefits of Sophia's approach?
  
  
  
• What financial concept is Sophia demonstrating?
  
  
  

My Credit Card Takeaway

Instructions: In one or two sentences, write down the most important thing you learned about credit cards today or one key piece of advice you would give someone about using them.

Pay in Full vs. Minimum Payment Challenge

Instructions: Read the scenario below and answer the questions. Use a calculator if needed!

Scenario: The Gaming Laptop

Sarah bought a new gaming laptop for $1200 using her credit card. Her credit card has an interest rate (APR) of 20%. Her minimum payment is 2% of the balance or $25, whichever is greater.

Let's assume for simplicity that she doesn't make any new purchases and the interest is applied to the remaining balance each month.

Questions:

1. Option A: Pay in Full
   If Sarah pays the entire $1200 balance on her first statement due date, how much interest will she pay?
   
   
   
   
   What is the total amount she will pay for the laptop?
   
   
   
   

2. Option B: Pay the Minimum
   If Sarah only pays the minimum payment each month, estimate how long do you think it will take her to pay off the laptop?
   
   
   
   
   (Teacher Note: This is an estimation question, actual calculation can be complex. Guide students to understand it will take a long time and cost a lot more.)

3. The Real Cost of Minimum Payments
   Without doing complex calculations, explain why paying only the minimum payment makes the laptop so much more expensive and takes so much longer to pay off.
   
   
   
   
   
   
   

4. Your Advice for Sarah
   What advice would you give Sarah about paying off her gaming laptop?
   
   
   
   
   
   
   

Credit Card Choice Challenge

Instructions: Imagine you are a financial advisor. Read about these three fictional credit cards and then advise the individuals in the scenarios on which card would be best for them and why.

The Cards:

• Card A: "The Traveler's Dream"

  • Annual Fee: $95
  • Interest Rate (APR): 18%
  • Rewards: 3x points on travel and dining, 1x point on everything else. Points can be redeemed for flights or hotel stays.
  • Benefits: Travel insurance, no foreign transaction fees.
  • Requirement: Good to excellent credit history.

• Card B: "The Smart Saver"

  • Annual Fee: $0
  • Interest Rate (APR): 15% (lowest available)
  • Rewards: 1% cash back on all purchases.
  • Benefits: Free credit score monitoring.
  • Requirement: Good credit history.

• Card C: "The Credit Builder"

  • Annual Fee: $0
  • Interest Rate (APR): 25% (higher than others)
  • Rewards: None
  • Benefits: Reports to all three major credit bureaus (helps build credit quickly if paid responsibly).
  • Requirement: Limited or no credit history. Often requires a security deposit.

The Scenarios:

Scenario 1: Emily, the Student

Emily is 18 years old and just got her first job. She wants to get a credit card to start building her credit history so she can eventually rent an apartment on her own. She plans to use it for small, regular purchases and pay it off in full every month. She has no credit history.

Which card would you recommend for Emily and why?

Scenario 2: David, the Frequent Flyer

David travels for work frequently and enjoys taking personal trips. He uses his credit card for almost all expenses and always pays his balance in full. He wants a card that maximizes his travel rewards. He has an excellent credit history.

Which card would you recommend for David and why?

Scenario 3: Maria, the Budget-Conscious

Maria wants a credit card for emergencies and occasional larger purchases, but she's very careful with her money. She sometimes carries a small balance for a month or two, so a lower interest rate is important to her. She has a good credit history.

Which card would you recommend for Maria and why?