Analyzing a Credit Card Statement, Part 2

Lesson Content

• Lesson Plan Template:

  CTE Lesson Plan

• CTE Course Info and Benchmark Notes

  
  

  Program Title (as applicable): N/A

  Course Title: Fundamentals of Finance

  Course Number: 8540400

  Career Cluster: Finance

  CIP Number: 148540400M

  Course Type: Orientation/Exploratory

  Standard(s) or benchmarks

  Focus

  • 02.01 Apply the following tools to increase work efficiency: word processing, database, spreadsheet programs, presentation programs, email systems, and the Internet.
  • 01.02 Describe and use current and emerging computer technology and software to perform personal and business related tasks.

  Supporting

  • 03.03 Develop problem-solving skills.

• Unit Outline

  
  

  This lesson could be taught within a unit focused on using credit. The unit can begin with an overview of loans and interest then students build on and make connections to this lesson by exploring simple interest and compound interest, credit card statements, and how to calculate credit card payments. The unit can conclude with a scenario-based activity where students provide recommendations on how to use, or preserve, credit lines based on given information.

• Career Connection

  
  

  Students will use prior knowledge of analyzing a credit card statement to explore the calculations associated with determining the balance of the credit card, available credit, the interest charged, and the minimum payment due. Knowing how to calculate these main features commonly included on a credit card statement allows students to develop their financial literacy, quantify the “true” cost of using credit, and become informed consumers when deciding to use credit or explore a career in finance in the future.

• Learning Objectives

  
  

  Students will be able to:

  • Discuss what periodic interest is and why it used.
  • Use periodic interest to calculate the amount of interest charged.
  • Calculate the minimum payment due based on a percentage of the balance.
  • Explain the relationship between a credit card balance and available credit.
  • Calculate the available credit of a credit card.
  • Use formulas within a spreadsheet to calculate missing values of a credit card statement.

• Prior Knowledge

  
  

  Students should be familiar with:

  • Reading a credit card statement.
  • Knowing APR is an annual percentage rate.
  • Distinguishing between principal and interest amounts.
  • Converting between percentages and their equivalent decimal form.
  • Using formulas to format cells in spreadsheet software.
  • Referencing cells within the same spreadsheet to create unique formulas.

• Guiding Questions

  
  
  • Why is it important to understand the calculations used to produce a credit card statement?
  • How can technology be used to make business related tasks more efficient?

• Procedure

  
  

  1. To introduce the lesson, display the 1st page of the Odd One Out handout (see attachments). Allow students time to think about the information. Remind them that there is no correct answer, and they should be ready to explain their choice using unique reasoning (i.e., choosing the blue box because the previous balance is $5,000.00 is not unique since there are multiple credit cards with the same previous balance). Once students have made their decisions and are ready to share, facilitate a whole group discussion. The following questions can be used, as needed, to guide discussion:

  • Which credit card information did you choose and why?
  • What do the different terms mean? (Previous balance, interest charged, etc.)
  • How are your reasons for your choice similar to your peers who chose the same information?
  • How are your reasons for your choice different than your peers who chose the same information?
  • What calculations did you perform to help support your reasoning?
  • What else did you notice about the credit card information presented?

  2. Display the 2nd page of the Odd One Out handout (see attachments). The bold items are the specific pieces of information that make each credit card information unique. Based on student responses from step 1, discuss any reasonings students may have overlooked or did not use to support their choice. Also use this time to address periodic interest rates and how they are used with credit card calculations. The following questions can be used, as needed, to guide facilitation:

  • What similarities do you notice among the different choices?
  • What differences do you notice among the different choices?
  • How can you verify the accuracy of these values?
  • What do you notice about the minimum payment amounts?
    • Generally, credit card minimum payments are between 2 and 5 percent of the balance and rounded up to the nearest whole number. Why do you think financial institutions calculate minimum payments in this way?
  • Is the APR listed used to calculate the interest charged? How do you know?
    • Use the APR to calculate the interest charged. Why is APR multiplied with the previous balance not equivalent to the interest charged?
  • How often is a credit card statement compiled or created?
    • Since monthly statements are common practice, the interest rate given as an APR is often not the same percentage used to calculate monthly interest accrued. How do you think the APR is used to determine the interest charged each month?
    • The APR is an annual percentage rate therefore, a periodic interest rate is used to calculate interest accrued on a monthly basis. What is the periodic interest rate for each credit card?

  3. Explain to students that they will use the information discussed so far to format cells to accurately calculate parts of a credit card statement using spreadsheet software. Inform students they will only focus on 4 parts of a credit card statement: interest charged, new balance, available credit, and minimum payment due.

  4. As technology is available, ensure students or pairs of students have access to a computer. Share a copy of the Credit Card Calculations spreadsheet (see attachments) with students. Allow students time to format the cells correctly using formulas and cell references.

  • Please see the Teacher Notes for additional comments regarding the spreadsheet.
  • Students will only be able to select and format the highlighted cells. Cells will turn green once the correct value is displayed.
  • As students are working, visit students to monitor progress, compare strategies for completing the missing values, answer questions, and address any misconceptions that arise.
  • Once the majority of students are done, have them share and compare strategies and/or formulas with each other.

  5. To conclude the lesson, use the guiding questions to facilitate a discussion that allows students to reflect on what they have learned.

• Teacher Notes

  
  

  Credit Card Calculations Spreadsheet

  • The spreadsheet includes 4 tabs. The 1st two tabs are the front and back of a credit card statement where the cardholder did not make any purchases. The 2nd two tabs are the front and back of a credit card statement where the cardholder made purchases during the open/close date. Tabs that aren’t being used can be deleted at the teacher's discretion or the teacher can choose to have students attempt to format both statements using the information.
  • The statement uses 2% of the balance, rounded up to the nearest whole dollar, to determine the minimum payment due. If students are not familiar with the "ROUND" formula, it will need to be explicitly taught during or prior to this lesson.
  • The unlocked/highlighted cells will turn green if the correct value is entered and does not consider if a formula is used or not. The teacher will need to check students’ spreadsheets to ensure they are using formulas to calculate the missing values.
  • This spreadsheet is also used with the Analyzing a Credit Card Statement Lesson (Resource #207141). If the teacher wishes to modify this using different values, the spreadsheet can be unprotected and edited using the password “cpalms”.
  • If this lesson is taught within a unit focused on understanding credit, the Analyzing a Credit Card Statement (Resource #207141) lesson can be taught before this lesson to address some of the prior knowledge and terms commonly included on a credit card statement.

• Optional

  
  

  Formative Assessment Suggestions

  • Students can turn in their completed spreadsheets to be checked for accuracy.