Overview: Students will learn how credit and credit cards work.

Materials: TV/VCR, copies of worksheet Credit Cards: The Fine Print and applications for different credit cards. Collect applications from local businesses, or search the Web for credit card applications.

Eleven percent of teenagers own their own credit cards and 40 percent use their parents' cards.

Americans have more than one billion credit cards.

Fewer than one-third of all Americans pay off their credit card balances each month. In fact, the average cardholder is $2,700 in debt and is paying 16 percent interest.

More Americans declared bankruptcy in 1996 than graduated from college.

Arguments about money play a major role in 90 percent of divorce cases.

Before Viewing the Video, Discuss: Credit cards are not "free money." Nor are credit card companies doing people a favor when they give them credit. Credit cards are money-makers for the card companies because they must be paid off, and often the payments include high interest and other fees. These charges add up very quickly--credit purchases can cost buyers much more than cash purchases.

Credit card companies try to bring in new customers when they are 18 years old, and many offer cards to college students. Credit cards are so convenient to use that people forget they are paying finance charges. Sometimes it's easy to get more than one card, making it easier to get even deeper into debt.

If you decide to use credit, do so responsibly. Read the fine print and understand what charges you will have to pay!

Start video when screen reads: "Symptom: A Rash of Bankruptcies." (about 12: 61 on the counter)

Stop video when screen reads: "Symptom: Social Scars." (about 16:03)

Ask students:

1. What happens when people got so far into debt that they can't pay their bills?

2. The Adams family in Affluenza nearly got a divorce because of their debt. What could happen in families if bills can't be paid?

3. What are other ways children can be affected by their parents' debt?

Review the following credit terms with students.

Annual Fee: The amount of money the lender charges per year for the use of their card. This is different than Annual Interest Rate. This amount is billed to you even if you do not charge anything on the card for that year.

Grace Period: The time in which you can pay off all new purchases without incurring finance charges. Typically, if you do not pay off your entire bill, all new purchases begin accruing finance charges immediately.

Late Fee: A penalty assessed if your monthly payment is made after the due date or Grace Period.

Over-the-Limit Fee: A penalty assessed if you exceed your maximum credit limit. Finance charges can sometimes put you over your limit without you even realizing it.

Cash Advance: These are charged when you receive cash against your credit line and are paid in addition to the interest rate. There is usually no grace period on cash advances.

Finance Charge: The cost of borrowing money. Usually this is a percentage of how much you borrow.

Minimum Payments: The minimum amount you are required to pay the issuer each month. By making only the minimum payment on the average credit card, a $2,000 loan can take more than 11 years to repay. By that time, they buyer will have paid $1,900 in interest!

Math: split students into teams of two. Give each student a copy of the worksheet Credit Cards: The Fine Print.

One member of each team receives a credit card application, and the other team member an application for a different credit card.

Ask students to fill out the worksheet, and discuss the results with the class.

Using information from the worksheet, test out the interest rates on the credit card applications:

1. What happens if you pay the minimum amount on a balance of $2,000 for 10 months?

2. How long will it take to pay off a $1,000 balance if you only pay the minimum amount each month?

3. How much would they have to pay each month to pay off $1,000 in six months? In nine months?

Compare payments and fees. Which card would students rather use?

* Activity courtesy of Consumer Credit Counselors of San Diego and Imperial Counties. CCC of San Diego has an excellent financial literacy curriculum. For more information, write: Consumer Credit Counselors of San Diego and Imperial Counties, 1550 Hotel Circle N., Suite 110, San Diego, CA 92108. phone: 619-497-0200.

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