How Credit Cards Work

45-minute agenda

1. 0–5 min

   Warm-up

   Post: “A credit card gives you a $1,000 limit. Is that $1,000 of your money? Why or why not?”

   Teacher note: No — it's the most the bank will lend you. Every dollar charged is a dollar owed.

2. 5–17 min

   Direct instruction

   Present the lesson slides. Make sure students leave with these points:

   • Pay the full statement balance and you usually pay $0 in interest.
   • Due dates are at least 21 days after the statement is sent.
   • Utilization = balance ÷ limit. Keep it low.
   • Cash advances cost a fee plus immediate interest.
   • Only charge what you already have.

   Use the “See it” slide (A credit card billing cycle) to make the idea visual.

3. 17–22 min

   Worked example

   Walk through “Sam's first statement” on the slides. Pause before the result and ask students to predict it.

4. 22–32 min

   Read the Statement

   Format: pairs · 10 minutes

   1. Show a simple statement: previous balance $0, purchases $340, statement balance $340, minimum payment $25, credit limit $1,000, due date 25 days after the statement.
   2. Pairs answer: How much should you pay to owe no interest? What's the utilization? What happens if you pay only $25?
   3. Add a twist: a $100 cash advance with a 5% fee. Pairs figure out the fee and when interest starts.

   What to look for: Pay the full $340 to owe $0 interest. Utilization is 34%. Paying $25 leaves $315 that starts charging interest. The cash advance fee is $5, and interest starts right away — there's no grace period.

5. 32–37 min

   Check for understanding

   Use the question slides — or run them as a Four Corners game. Answers:

   1. How much interest do you pay on those purchases? — A. $0
   2. What's your credit utilization? — D. 80%
   3. A cash advance from a credit card gets the same interest-free grace period as a regular purchase. — False
6. 37–42 min

   Discussion

   • Card companies make money from interest and fees. How can a card be free for someone who pays in full?
   • What rules would you set for yourself with a first credit card?
7. 42–45 min

   Exit ticket

   Prompt: What is a grace period?

   Answer: The time between the statement and the due date (at least 21 days). Pay the full statement balance by the due date and you usually pay no interest on purchases.