A propos of financial literacy month in Canada, Rob Carrick examines changes in attitudes among young Canadians regarding credit cards. Noting that using credit is necessary to establish a credit rating, Mr. Carrick also reports that younger credit card users think of them as “convenience cards,” and further, that they are more diligent at paying off their cards than older users.
Appropriate Subject Area(s):
Social studies, current events, economics, personal finance
Key Question(s) to Explore:
- What are the key benefits and hazards of using credit cards? How do today’s youth view credit cards?
Marginalized, Qtrade, Equifax, principal, interest
Introduction to lesson and task:
As students advance to post-secondary education or directly to a job, they need to understand the importance of generating a positive financial credit rating. They’ll require it for taking on necessary debt, such as a vehicle or property purchase, and for managing their finances by using credit cards to record and manage their purchases.
The attached article suggests there are changing views among young people about credit cards. If so, students may well be on their way to becoming responsible borrowers. Either way, they can benefit from this lesson on uses and abuses of credit cards.
Students will work in groups to read and discuss the attached article; they will develop group reports that critique the article relative to their own experiences.
To evaluate the exercise at the end of the worksheet, see below and: https://www.investopedia.com/articles/01/061301.asp
- Principal: $2,000
- Payment: $60 (3% of remaining balance)
- Interest: $2,000 x 20% x 12 months = $33.33
- Principal Repayment: $60 – $33.33 = $26.67
- Remaining Balance: $1,973.33 ($2,000 – $26.67)
Done every month, you will pay $4,241 in total over 15 years to absolve the $2,000 in credit card debt. The interest totals $2,241, higher than the original credit card debt.)
Action (lesson plan and task):
Engage students in a short discussion around credit cards. Ask for a show of hands to see how many students already have cards, how many are planning to get one, and how many do not intend to have one. Discuss, briefly, then introduce a group activity in which students take this issue up in more detail.
Organize students in groups and provide them with the individual copies of the article and the work sheet, below.
Have volunteers in your group read the article aloud.
Discuss and record responses to the article and to the questions, tasks, below:
- Show of hands: List the numbers in your group who already have a card, plan to get one, and do not plan to get one.
- Cite anything in this article that changed your mind about your position.
- In the article, what are the main reasons provided for young people to obtain a credit card? Do you agree with these? Give reasons.
- In your group, of those who have credit cards, how many still prefer to pay cash? Why or why not?
- What other forms of payment can you or do you use? (For example, Interac, smart phone, email transfer)
- How does your group feel about going into debt? Summarize.
- Do you agree that students are more likely to pay off their monthly card balances than older card users? Why or why not?
- Do you agree that the term “credit card” is out of date, too “old school”?
- Carrick starts his article this way: “A new money rule for young adults: Get a credit card as soon as you start university or college and use it often. A personal finance writer is saying this – not a bank.” Why might he have added the last line, underlined for effect here?
- Imagine that your credit card company charges 20% interest on outstanding balances. You run up a debt of $2000 and pay the minimum (3%) monthly. At this rate, how long will it take you to pay off the debt and how much will you end up paying in total? Here is a guide:
- Principal: $2000
- Monthly payment: 3% of principal, first month, then 3% of remaining principal each succeeding month
- Interest: Principal repayment: monthly payment, minus interest payment
- Remaining balance: Principal minus principal repayment
- Summarize your work for an oral report at the end of the session.
Consolidation of Learning:
- Students report to the class, then discuss their points of difference and agreement.
- Students can describe the key benefits and hazards of using credit cards.
- Ask students who use credit cards to keep track of their purchases and expenses for a month and then report to class on what they learned, if anything, from the experience.