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Credit Uses and Costs

Main Core Tie

Adult Roles and Financial Literacy
Strand 7 Standard 2




Students will understand the history and basic types of credit, the advantages and disadvantages of using credit, and its costs.


Additional Resources:

  • ACCESS Education Systems
    724 Front Street, Ste 340
    Evanston, WY 82930
    1(888) 292-4333
    (These booklets are FREE!)
  • Out of Hock & Out of Debt
    By Harry Dahlstrom
    Dahlstrom & Company, Inc
    155 Wilson Street
    Holliston, MA 01746-1433
  • "The ABC's of Credit Card Finance"
    by Carol A. Carolan, Ph.D.
    Center for Student Credit Card Education, Inc (CSCCE)

Instructional Procedures

Use the vocabulary worksheet and key (pdf).

Primary Vocabulary

  • Credit
  • Principal
  • Interest
  • Capital
  • Capacity
  • Character
  • Collateral
  • APR
  • Service Credit
  • Sales Credit
  • Cash Credit
  • Co-signer
  • Credit Bureau
  • Credit Rating
  • Finance Charge
  • Minimum Payment
  • Late Fees
  • Closing Costs
  • Grace Period
  • Annual Fees

Credit K-W-L
Create a K-W-L chart on the board using information from "How Credit Works" from the NEFE foundation.

Content Outline, Activities and Teaching Strategies
(All options do not necessarily need to be taught. Select ones to cover standards and objectives and according to your district policies.)

Option 1: History of Credit
Using the booklet "Out of Hock & Out of Debt", available at, give a brief history of consumer debt, credit cards, and consumer credit counseling.

Option 2: Brainstorm
Ask student to brainstorm reasons why people borrow money or items. Share with the class some of the advantages and disadvantages of borrowing.

Option 3: Types of Credit
Use the Credit Basics Teacher Reference Material and Credit Basics Transparency (pdf) to discuss credit. Use the Loan Calculation Worksheet (pdf) to figure the cost per month and the total cost of the loan for a certain loan amount.

Option 4: Credit Basics Exam
Have students complete the Credit Basics Exam (pdf). Teachers use the Credit Basics Exam Teacher Key (pdf).

Option 5: Credit Matching Review
Use the Credit Match Review (pdf) and the Credit Match Review Key (pdf). Match the definition with the word. Place the correct letter in the space provided.

Option 6: Establishing Credit
Teachers and students will discuss the information found on the American Bankers Association website and the Federal Trade Commission website.

Option 7: Using Credit Wisely and the Cost of Using Credit
Refer to NEFE teacher resource and student guide for a lesson plan and activities.

Option 8: Guest Speaker
Contact a local banker to come speak to the class about banking and credit information. Ask them to bring a loan application to be filled out as a practice activity by students.

Option 9: Calculate and Compare Cost of Using Credit
Direct students to the website to calculate and compare the cost of buying an automobile at varying interest rates and time limits. Students will identify the true cost of borrowing money by isolating the finance charges.

Option 10: Cost of Paying the Minimum
Students will use the chart "How Long and How Much Do I Have to Pay?" found in the front of the booklet The ABC's of Credit Card Finance by Carol Carolan to compare the cost of credit, paying only the minimum vs. adding $10.00 or more each month to the payment, at varying interest rates.

Option 11: Compare and Calculate
Teacher will provide three different credit card applications with the vital (personal) information removed (e.g., names, addresses, and account numbers). Make a copy for each student to read and evaluate three different credit card offers to determine the total cost of buying an item (e.g., a television or stereo) purchased on credit at three different interest rates (dictated by each offer). Students will calculate how long it will take to repay the debt making minimum payments.

Evaluate results of Credit Basics Exam and the Credit Matching Review.

Consumer credit permits the use of future income to satisfy present needs and wants. Credit is a service for which consumers pay. Wisely used credit can help consumers raise their standard of living. Used without prudent forethought and self-discipline, credit can be a source of stress and hardship on the individual and family.

Assessment Plan

Evaluate results of the Credit Basics Exam and the Credit Matching Review.

Created: 07/14/2011
Updated: 02/05/2018