Lesson 1 - Your Very Own Credit Card › wp-content › uploads › 2014 › 05 › ... · 2017-12-04 · Lesson 1 - Your Very Own Credit Card Congratulations! You group has a Macy’s™

Career Academy Blended Mathematics Banking, Social Services Student Journal Credit Card Debt Lesson 1 – Macy’s™ Card Group

© Copyright 2014. The Johns Hopkins University. All Rights Reserved. 49

Lesson 1 - Your Very Own Credit Card Congratulations! You group has a Macy’s™ credit card. It has an annual interest rate of 15% compounded monthly. Your group has already charged $2,000.00 of merchandise. Your group decides not to charge anything else until you pay off the $2,000.00 balance. Your monthly payments for the Macy’s™ credit card are $40.00. Exercises – Pay it Off! Note: To complete the activity you will need the following equations.

Equation 1 Yearly Rate

Monthly Interest Rate APR

12 12

Equation 2 Interest Paid = Total Amount Paid - Initial BalanceTotal

The equation can also be written as:

Total Interest Paid = Monthly Payment( ) - n P n = Number of Months to Pay Off Card

Equation 3

Monthly Payment

1 1 n

iP

i

P = Principal or Initial Balance, i=Monthly Interest Rate (or quarterly, depending on the number of compounding periods, m), n = Number of Months to Pay Off card.

1. Complete the “Payment Plan Chart” on the next page. You want to get to a zero balance by paying $40.00 each month. Calculate the “New Balance” column for each month by:

New Balance = Old Balance + Monthly Interest – Monthly Payment

After 18 months if you have not arrived at a zero balance make a prediction as to how long it will take to pay off the credit card.

50 © Copyright 2014. The Johns Hopkins University. All Rights Reserved.

Credit Card Payment Plan Chart for the Macy’s™ Credit Card Month

Monthly Payment Monthly Interest New Balance $2,000.00

1

$40.00

0.152000 25.00

12

(2000 25) 40

$1,985.00

2

$40.00

0.151985 24.81

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

$0.00

Career Academy Blended Mathematics Banking, Social Services Student Journal Credit Card Debt Lesson 1 – Macy’s™ Card Group


2. Using your graphing calculator construct a connected scatter plot with the months along the x-axis and the monthly balances along the y-axis. Copy the scatter plot onto the graph below.

Note: To plot a graph using the graphing calculator follow the steps below.

a. First clear all lists and clear all “Y=.”

b. Enter data for months into list L1. Enter data for monthly balances into L2. Under

button 2nd Stat Plot, make sure only Plot 1 is “On,” set Xlist for L1 and set Ylist for L2

and set the type on the connect the points type.

c. When you hit the “Graph” button, the connected scatter plot should appear. You may need to adjust the graph window. Hint: if using a Texas Instrument™ graphing calculator, use “Zoom” [Stat] for the best view.

New Balance

0 Month

3. Predict the number of months necessary to pay off the Macy’s™ credit card balance. Record the results in the “Credit Card Pay Off Table.”

4. Calculate the total amount paid to Macy’s™. Record the results in the “Credit Card Pay Off Table.” 5. Calculate the total interest paid to Macy’s™. Record the results in the “Credit Card Pay Off Table.”


Credit Card Pay Off Table

# of Months to Pay Off Total Amount Paid Total Interest Paid

6. Making Predictions

a. Predict what your monthly payments should be in order to pay off the Macy’s™ credit card in four months.

b. How did you arrive at this prediction?

7. Calculate the amount of the monthly payment needed to pay off the Macy’s™ card in four months.

8. Group Discussion

What can you determine from the scatter plot graphs? For example, what is the shape of the graph? How does it change over time? How can you use this information to make predictions about interest paid, Monthly Payments and pay off times?

9. Have a group member collect the overhead transparencies and markers from the front of the classroom. Transfer the information onto the transparencies. Prepare a class presentation. Be sure to include payment plan method, monthly payment, how long it takes to pay off the Macy’s™ credit card, the total amount paid, the total interest paid, the graph, the shape of the graph, and how the graph changes over time.

Career Academy Blended Mathematics Banking, Social Services Student Journal Credit Card Debt Lesson 1 – Bloomingdales™ Card Group


Lesson 1 - Your Very Own Credit Card Congratulations! You group has a Bloomingdales™ credit card. It has an annual interest rate of 15% compounded monthly. Your group has already charged $2,000.00 of merchandise. Your group decides not to charge anything else until you pay off the $2,000.00 balance. Your monthly payments for the Bloomingdales™ credit card are $100.00. Exercises – Pay it Off! Note: To complete the activity you will need the following equations.

Equation 1. Yearly Rate


12 12

Equation 2. Interest Paid = Total Amount Paid - Initial BalanceTotal



Equation 3.

Monthly Payment

1 1 n

iP

i






Credit Card Payment Plan Chart for the Bloomingdales™ Credit Card Month


1

$100.00

0 152000 25 00

12

..

(2000 25) 100

$1,925.00

2

$100.00 0 151925 24 06

12

..

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

$0.00



2. Using your graphing calculator construct a connected scatter plot with the months along the x-axis

and the monthly balances along the y-axis. Copy the scatter plot onto the graph below.



b. Enter data for months into list L1. Enter data for monthly balances into L2. Under button 2nd Stat Plot, make sure only Plot 1 is “On,” set Xlist for L1 and set Ylist for L2 and set the type on the connect the points type.

c. When you hit the “Graph” button, the connected scatter plot should appear. You

may need to adjust the graph window. Hint: if using a Texas Instrument™ graphing calculator, use “Zoom” [Stat] for the best view.

New Balance

0 Month

3. Predict the number of months necessary to pay off the Bloomingdales™ credit card balance. Record the results in the “Credit Card Pay Off Table.”

4. Calculate the total amount paid to Bloomingdales™. Record the results in the “Credit Card Pay Off

Table.” 5. Calculate the total interest paid to Bloomingdales™. Record the results in the “Credit Card Pay Off

Table.”





a. Predict what your monthly payments should be in order to pay off the Bloomingdales™ credit card in four months.


7. Calculate the amount of the monthly payment needed to pay off the Bloomingdales™ card in four months.

8. Group Discussion


9. Have a group member collect the overhead transparencies and markers from the front of the classroom. Transfer the information onto the transparencies. Prepare a class presentation. Be sure to include payment plan method, monthly payment, how long it takes to pay off the Bloomingdales™ credit card, the total amount paid, the total interest paid, the graph, the shape of the graph, and how the graph changes over time.

Career Academy Blended Mathematics Banking, Social Services Student Journal Credit Card Debt Lesson 1 – Nordstrom™ Card Group


Lesson 1 - Your Very Own Credit Card Congratulations! You group has a Nordstrom™ credit card. It has an annual interest rate of 15% compounded monthly. Your group has already charged $2,000.00 of merchandise on the credit card. Your group decides not to charge anything else until you pay off the $2,000.00 balance. Your monthly payments for the Nordstrom™ credit card are $200.00. Exercises – Pay it Off! Note: To complete the activity you will need the following equations.



12 12




Equation 3.

Monthly Payment1 1 n

iP

i






Credit Card Payment Plan Chart for the Nordstrom™ Credit Card Month


1

$200.00 0 152000 25 00

12

..

(2000 25) 200

$1,825.00

2

$200.00 0 151825 22 81

12

..

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

$0.00







button 2nd Stat Plot, make sure only Plot 1 is “On,” set Xlist for L1 and set Ylist for L2 and set the type on the connect the points type.


New Balance

0 Month

3. Predict the number of months necessary to pay off the Nordstrom™ credit card balance. Record the results in the “Credit Card Pay Off Table.”

4. Calculate the total amount paid to Nordstrom™. Record the results in the “Credit Card Pay Off

Table.” 5. Calculate the total interest paid to Nordstrom™. Record the results in the “Credit Card Pay Off

Table.”





a. Predict what your monthly payments should be in order to pay off the Nordstrom™ credit card in four months.


7. Calculate the amount of the monthly payment needed to pay off the Nordstrom™ card in four months.

8. Group Discussion


9. Have a group member collect the overhead transparencies and markers from the front of the classroom. Transfer the information onto the transparencies. Prepare a class presentation. Be sure to include payment plan method, monthly payment, how long it takes to pay off the Nordstrom™ credit card, the total amount paid, the total interest paid, the graph, the shape of the graph, and how the graph changes over time.

Career Academy Blended Mathematics Banking, Social Services Student Journal Credit Card Debt Lesson 1 – Lord & Taylor™ Card Group


Lesson 1 - Your Very Own Credit Card Congratulations! You group has a Lord & Taylor™ credit card. It has an annual interest rate of 15% compounded monthly. Your group has already charged $2,000.00 of merchandise on the credit card. Your group decides not to charge anything else until you pay off the $2,000.00 balance. Your monthly payments for the Lord & Taylor™ credit card are $400.00. Exercises – Pay it Off! Note: To complete the activity you will need the following equations.



12 12




Equation 3.


iP

i






Credit Card Payment Plan Chart for the Lord & Taylor™ Credit Card Month


1

$400.00 0.152000 25.00

12

(2000 25) 400

$1,625.00

2

$400.00 0.151625 20.31

12

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

$0.00









New Balance

0 Month

3. Predict the number of months necessary to pay off the Lord & Taylor™ credit card balance. Record the results in the “Credit Card Pay Off Table.”

4. Calculate the total amount paid to Lord & Taylor™. Record the results in the “Credit Card Pay Off

Table.” 5. Calculate the total interest paid to Lord & Taylor™. Record the results in the “Credit Card Pay Off

Table.”





a. Predict what your monthly payments should be in order to pay off the Lord & Taylor™ credit card in four months.


7. Calculate the amount of the monthly payment needed to pay off the Lord & Taylor™ card in four months.

8. Group Discussion


9. Have a group member collect the overhead transparencies and markers from the front of the classroom. Transfer the information onto the transparencies. Prepare a class presentation. Be sure to include payment plan method, monthly payment, how long it takes to pay off the Lord & Taylor™ credit card, the total amount paid, the total interest paid, the graph, the shape of the graph, and how the graph changes over time.

Career Academy Blended Mathematics Banking, Social Services Student Journal Credit Card Debt Lesson 1 – Neiman Marcus™ Card Group


Lesson 1 - Your Very Own Credit Card Congratulations! You group has a Neiman Marcus™ credit card. It has an annual interest rate of 15% compounded monthly. Your group has already charged $2,000.00 of merchandise. Your group decides not to charge anything else until you pay off the $2,000.00 balance. Your minimum monthly payments for the Neiman Marcus™ credit card are $40.00. Some months you only pay the minimum payment. Some months you make $100.00 payments. Some months you make $200.00 payments and other months you make $500.00 payments. Exercises – Pay it Off! Note: To complete the activity you will need the following equations.



12 12




Equation 3.


iP

i


1. Complete the Payment Plan Chart on the next page. You want to get to a zero balance. The minimum monthly payment is $40.00. Some months you pay only the minimum payment. Some months you make $100.00 payments. Some months you make $200.00 payments and other months you make $500.00 payments. Assume that the first month you pay only the $40.00 minimum payment, and the second month you pay $200.00.

Calculate the new balance for each month by:




Credit Card Payment Plan Chart for the Neiman Marcus™ Credit Card Month


1

$40.00 0 152000 25 00

12

..

(2000 25) 40

$1,985.00

2

$200.00 0 151985 24 81

12

..

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

$0.00









New Balance

0 Month

3. Predict the number of months necessary to pay off the Neiman Marcus™ credit card balance. Record the results in the “Credit Card Pay Off Table.”

4. Calculate the total amount paid to Neiman Marcus™. Record the results in the “Credit Card Pay Off

Table.” 5. Calculate the total interest paid to Neiman Marcus™. Record the results in the “Credit Card Pay Off

Table.”





a. Predict what your monthly payments should be in order to pay off the Neiman Marcus™ credit card in four months.


7. Calculate the amount of the monthly payment needed to pay off the Neiman Marcus™ card in four months.

8. Group Discussion


9. Have a group member collect the overhead transparencies and markers from the front of the classroom. Transfer the information onto the transparencies. Prepare a class presentation. Be sure to include payment plan method, monthly payment, how long it takes to pay off the Neiman Marcus™ credit card, the total amount paid, the total interest paid, the graph, the shape of the graph, and how the graph changes over time.

Career Academy Blended Mathematics Banking, Social Services Student Journal Credit Card Debt Lesson 2 – Macys™ Card Group


Lesson 2 – Ouch, It’s a Credit Card Use the “Credit Card Payment Plan Chart” and information from Lesson 1. Suppose you make one late payment in month 2. The late fee is $25.00. Because of your late payment, you’re A.P.R. increases to 18%. You want to pay off the credit card in the same amount of time as Lesson 1.

1. What would your new monthly payment need to be?

2. What would be the total interest paid?

3. What conclusions can you make compared to Lesson 1?

4. List at least three strategies for reducing credit card debt:

a.

b.

c.


5. Have a group member collect the overhead transparencies and markers from the front of the classroom. Transfer the information onto the transparencies. Prepare a class presentation. Be sure to include your late fee, the new monthly payment, the total interest paid, your conclusions, and the three strategies for reducing credit card debt. Make notes on your presentation below.



Lesson 2 – Ouch, it’s a Credit Card Use the “Credit Card Payment Plan Chart” and information from Lesson 1. Suppose that your A.P.R. is based on the U.S. Prime Rate. The Bloomingdales™ credit card has a variable rate that is 9.99% above the U.S. Prime Rate. Assume the prime rate each month is:

January 5.25% February 5.25% March 5.50% April 5.50% May 5.50% June 5.75%

Assume the trend continues in this fashion, for the remaining 6 months of the year.

1. What are the A.P.R.’s for each month given this new information? Record results in the “Bloomingdales™ A.P.R. Information Table.”

2. What are the monthly interest rates for each month given this new information? Record the results

in the “Bloomingdales™ A.P.R. Information Table.”

Bloomingdales™ APR Information Table Month APR for each Month Monthly Interest Rate January

February

March

April

May

June

July

August

September

October

November

December


3. For one year, what is the A.P.R.?



a.

b.

c.

6. Have a group member collect the overhead transparencies and markers from the front of the

classroom. Transfer the information onto the transparencies. Prepare a class presentation. Be sure to include your “Bloomingdales A.P.R. Information Table,” your conclusions, and the three strategies for reducing credit card debt.



Lesson 2 – Ouch, it’s a Credit Card Use the “Credit Card Payment Plan Chart” and information from Lesson 1. Suppose during month 8 you make a cash advance of $300.00. There is a cash advance fee of 3% of each cash advance and the A.P.R. on cash advances is 20.24%. You want to pay off the card in the same amount of time as you have already calculated. Note: Most credit card companies apply your monthly payment to the balance with the lowest A.P.R. first. The cash advance fee is added to the cash advance. As soon as you take out a cash advance, interest starts being charged, there is no grace period.

1. Beginning at month 9, what would your new monthly payment need to be? Record the results in the “Monthly Payment Plan Chart for Months 8 through 11.”

Monthly Payment Plan Chart for Month 8 through 11 Month

Monthly Payment

Monthly Interest (non-cash advance)

Monthly Interest (cash advance)

New Balance

Cash Advance Balance

8 $200.00 $9.10 $5.22 $537.20 $300 + 9.00 + 5.22 = 314.22

9 10 11 $0.00

2. What would be the total interest paid for the entire 11 months?




a.

b.

c.


classroom. Transfer the information onto the transparencies. Prepare a class presentation. Be sure to include your $300.00 cash advance, the 30% cash advance fee on each advance, the A.P.R. on cash advances, the new monthly payment, the total interest paid, your conclusions, and the three strategies for reducing credit card debt.



Lesson 2 – Ouch, it’s a Credit Card Use the “Credit Card Payment Plan Chart” and information from Lesson 1. Suppose that you cannot stop yourselves from making purchases with you credit card. During month 1 you charge $500.00. During month 4 you charge $250.00. During month 5 you charge $800.00. You now decide to shred your credit card to keep yourselves from making more purchases.

1. How long will it take you to pay off the Lord & Taylor™ credit card, assuming that you continue to make monthly payments of $400.00?

Credit Card Payment Plan Chart for the Lord & Taylor™ Credit Card Month


1

$400.00 0.152000 25.00

12

$1,625.00 (from Lesson #1) + 500.00 (from Lesson #2)

= $2,125.00 2

$400.00 0.152125 26.56

12

(2,125.00 + 26.56) – 400.00 =

1,751.56

3 $400.00

4

5

6

7

8

9

10

$0.00





a.

b.

c.


classroom. Transfer the information onto the transparencies. Prepare a class presentation. Be sure to include your $500.00 purchases (month 1), $800.00 purchases (month 4), how long it will take to pay off the card, the total interest paid, your conclusions, and the three strategies for reducing credit card debt.



Lesson 2 – Ouch, It’s a Credit Card Use the “Credit Card Payment Plan Chart” and information from Lesson 1. You transfer the $2,000.00 credit card balance to a new credit card that offers 0.0% APR for 12 months. After that time your monthly interest rate goes up to 21.99%.

1. What should your monthly payments be in order to pay off this new card in 12 months?




a.

b.

c.


5. Have a group member collect the overhead transparencies and markers from the front of the classroom. Transfer the information onto the transparencies. Prepare a class presentation. Be sure to include your new monthly payment, the total interest paid, your conclusions, and the three strategies for reducing credit card debt. Record your notes on your presentation below.

Career Academy Blended Mathematics Banking, Social Services Student Journal Credit Card Debt Lesson 3—The WOW Credit Card


Lesson 3 – The WOW Credit Card Each group is to create an exciting new credit card that will attract:

The hip The desirable The exclusive clientele

Each group will also design an advertising campaign that reflects the type of consumer your financial institution is trying to attract and how you are going to reach those consumers. You want to create a credit card that generates buzz so that consumers try to beat down your door to get one. This credit card, however, will only be awarded to a few very, select, and elite consumers. Offer great incentives to the consumer such as super low Annual Percentage Rate, purchase points, etc. Keep in mind that your financial institution wants to make large amounts of money from its credit card clients. Keeping this in mind, maybe you should include hidden and sneaky costs that the consumer does not realize, such as large penalties for late payments, high rates for cash advances, maybe the minimum monthly payment is designed to prolong the repayment of the credit card balance. Maybe the consumer is not responsible for credit card charges that are made after the card has been reported stolen, but perhaps your financial institution will raise the A.P.R. on that consumer’s credit card. Determine how monthly interest or finance charges are calculated. For example, using the average daily balance for the month, using the previous month’s balance, are new purchases included in the month or do you wait until the next month to calculate interest on those purchases. Remember, the credit card cannot be “too good” for the consumer but it cannot be “too bad,” either. You need to find a balance between the needs of the consumer and the needs of the financial institution. Your group will consist of two financial institution executives (more if the group contains more than four people) and two advertising agency executives (more if the group contains more than four people). The financial institution executives will determine the details of the Credit Card, such as:

Minimum income to obtain a credit card Credit limit Annual Percentage Rate Balance transfer rates Cash advance rates Late fees Gimmicks and incentives.

The executives must be able to explain the details of the credit card and provide an example.


The Advertising Agency Executives will create an advertising campaign for the credit card. The advertising campaign could be

Print (magazine, newspaper) ads Television or movie theater ads Billboard ads Internet ads Direct mail ads (not email).

The executives must be able to explain their reasons for choosing a particular advertising medium and how they addressed the disclosure issues of the credit card. The financial institution executives and advertising agency executives must work closely enough together so that each executive can explain the details of the others work. Each group will give a class presentation or unveiling of the new credit card and advertising campaign. All executives must be involved in the unveiling. The Financial Institute Executives first present the details of the new credit card. The advertising agency executives will then present the advertising campaign. This will be followed by a question and answer session. Rubric for Lesson 3 Assessment will be determined in the following manner: 1. Mathematical Content – up to 25 points

a. Description of Credit Card Details b. Mathematical Example

2. Presentation – up to 25 points a. Mathematical Content b. Explanation c. Clarity d. Thoroughness

3. Creativity – up to 25 points a. Artistic b. Innovative c. Effort

4. Q & A – up to 25 points

a. Effective Answers b. Correct Answers c. Thoughtful Answers

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Lesson 1 - Your Very Own Credit Card › wp-content › uploads › 2014 › 05 › ... · 2017-12-04 · Lesson 1 - Your Very Own Credit Card Congratulations! You group has a Macy’s™