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Real Stories

Understanding a Credit Card Bill

Materials Needed:
Supply of paper for student brainstorming; board or chart paper, markers, tape (easel if there is limited wall space)

Prior to beginning this activity the facilitator should write the following points of information so that they are visible to all participants:

  • Late fees are often $29.
  • Over the limit fees are often $29.
  • A typical interest rate is often 24%.
  • Amanda spent $4,000.
  • Amanda had five credit cards.

The facilitator should begin this activity by stating the following:
Amanda said, "Over about six months between five cards, I spent less than $4,000… I acquired over $30,000 in debt."

Question: How did Amanda manage to accumulate $30,000 in such a short time?

Divide the participants into small groups of three or four. Tell participants in each group to read over the five points of information visible in the classroom.

Next ask each group to brainstorm, by adding up fees, how many penalty fees it might take on five cards to add up to a balance of $30,000.

Facilitator Tip: One example of how this can be done is found in the document "Understanding a Credit Card Bill."

The facilitator should conclude this activity by saying:
"Perhaps this sort of thing happened to Amanda." Ask: How could you avoid the same problem? Lead a discussion and take suggestions on how to avoid Amanda's problems. Here is a list of suggestions that might be included in the discussion:

  • Make payments greater than the minimum required
  • Make payments when the bill arrives instead of waiting until the due date
  • Call the credit card company to have due date adjusted in order to avoid late payments
  • If you accumulate a responsible payment record, sometimes creditors will lower the rate of interest or delete the annual fee if you call them and ask them to do so.
  • Understand the consequences of not paying credit card bills on time. In addition to late fees, poor credit scores affect your future buying power of items such as cars and homes. It is also important to note that more than ever employers are investigating a job candidate’s credit history as a condition of employment.
  • If you need help in repairing your credit situation, how do you identify and select a financial advisor?