Teaching teens the true cost of charging

Teens are only a few years from fielding credit card offers, but many don’t understand that even small purchases can become costly if you stretch the payments over a long time. So how can you explain it to them?

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Your teen may be tempted

“Why not use a credit card to pay for it?”

$500 tablet
+ 13%
what you could end up paying

Explain that interest charges chip away at payments

Interest is a fee lenders charge in exchange for borrowing money.

$15 minimum payment =
$5 interest
Goes to the credit card company
$10 principal Goes toward your balance

If you pay the $15 minimum monthly payment on a $500 purchase, after your first payment you still owe $490.

And when you pay longer, you pay more

Teens may not realize that interest can add up fast—especially when you pay just the minimum.

Total purchase on credit card:* $500


$15 monthly

$25 monthly

$45 monthly

Payoff time:

3.5 years

23 months

12 months

Total interest:




Total cost:




* Assumes a minimum payment of $15 a month and interest that’s calculated as an annual percentage rate (also called APR) of 13 percent.

Teens can see that you can reduce the interest you pay on your debt, the time it takes to pay it off and the real cost by paying a little more each month.

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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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The results provided in this infographic are intended for illustrative purposes only. The terms and conditions for different credit cards will differ and may affect the total interest paid. For specific payoff balance information for your own credit card account, please call the number on the back of your card or refer to the back of your credit card statement for terms and conditions.