Grade 9-12

Buying on Credit

Time: 60 mins,
Updated: May 17 2024,


The student will be able to:

1. Include the cost of credit in weighing the expected costs and benefits of a purchase.
2. Calculate and use the real interest rate in determining the cost of credit.
3. Identify possible credit alternatives for use in purchasing goods and services.
4. Integrate short- and long-term perspectives and goals in credit purchase decisions.


This personal finance lesson is designed to help students make good consumer-credit decisions. Although using credit is beneficial at times, it often carries higher costs than many people realize. This lesson discusses the costs of credit in a manner that helps students calculate those costs and integrate them in short- and long-term decisions.

Economics and Personal Finance

Credit transactions are important to buyers and sellers. Sellers usually are not concerned about whether buyers use ready cash or borrowed money to pay for goods or services. Buyers need to be concerned about credit, however, because borrowed money is costly, and the costs vary depending upon the type of credit instrument used.


Credit enables consumers to “buy now and pay later.” It is a popular option. According to the Federal Reserve System, as of December 2023, consumer debt in the United States totaled about $17.5 trillion. That is a large sum, obviously, but by itself it does not mean that buying on credit is a bad thing. For some consumers in some cases, the advantages of the credit option outweigh the added costs. For others, however, the decision to buy on credit is shortsighted. Consumers who understand various credit instruments and the real costs that come with them are more likely to use credit well and avoid shortsighted decisions.



This lesson was originally published in CEE’s Capstone: Exemplary Lessons for High School Economics,  is 45-lesson curriculum that uses hands-on activities, exercises, simulations and projects to teach your students the ins-and-outs of high school economics.. Visit the CEE Store for more information about the publication and how to purchase it.

Personal Finance