Kitchen Credit Crunch Worksheet
Consumer Math & Culinary Arts Level 1 • Equipment Finance
Kitchen Credit Crunch
How to Buy Kitchen Equipment Without Falling Into Debt Traps
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The Goal: Equipping Maya's Bakery
Total Cost: $3,600
Chef Maya is opening a neighborhood bakery. She needs two pieces of equipment right away: a Commercial Oven ($2,200) and a Prep Refrigerator ($1,400). Together, they cost $3,600. Maya does not have $3,600 cash, so she must use credit.
1 Part 1: Maya's 3 Credit Choices
Option A: Credit Card
Interest Rate: 24% APR
(This equals 2% interest added every month).
Monthly Rule: Minimum payment is only $100 per month.
Option B: Store "0%" Deal
Promo: 0% interest for 12 months.
The Catch: Must pay full $3,600 in 1 year!
Monthly Rule: Store asks for only $100 minimum.
Option C: Fixed Bank Loan
Term: Fixed 2-year loan.
(24 monthly payments of $175).
Monthly Rule: Fixed payment of $175 every month.
2 Part 2: Crunch the Numbers (Show Your Calculations)
Question 1: What is the true cost of Option C (The Fixed Loan)?
Maya makes 24 payments of $175 each. Multiply to find the total amount she pays, then subtract the $3,600 equipment cost to find the interest fee.
Calculation (24 × $175):
Total Repaid = $_____________
Interest Fee (Total − $3,600):
Total Interest = $_____________
Question 2: How much must Maya pay monthly to finish Option B in 12 months?
To avoid all interest on the Store 0% Deal, Maya must pay off the entire $3,600 in exactly 12 equal monthly payments.
Monthly Formula ($3,600 ÷ 12):
Required Payment = $_____________ / mo.
Compare to Store's $100 Min:
Extra Needed = $_____________ / mo.
Quick Check: Turn to Page 2 to see the two hidden traps waiting in the fine print!
Kitchen Credit Crunch
• Page 2: Watch Out for Traps!
Page 2 of 2
3 Trap #1: The Credit Card "Minimum Payment" Trap (Option A)
The credit card charges 2% interest each month. In Month 1, Maya's starting balance is $3,600. She pays the minimum of $100. Look where her $100 really goes:
Step 1: Interest Fee (2%)
$3,600 × 0.02
$72.00 to Bank
Step 2: Equipment Paid
$100 − $72
$28.00 to Debt
Step 3: New Balance
$3,600 − $28
$3,572.00 Left
Reflect: Maya handed over $100, but her debt only dropped by $28! At this rate, it would take Maya over 5 years to pay off the oven and cooler, costing an extra $1,800+ in interest.
4 Trap #2: The "Deferred Interest" Fine Print Catch (Option B)
The store sign says "0% Interest for 12 Months!" But the contract says: "Deferred Interest." That means if you do not pay off every single penny before Month 12 ends, the store retroactively adds all 12 months of interest to your bill!
What Happens If Maya Only Pays $100 / Month?
- In 12 months, Maya pays: 12 × $100 = $1,200.
- She still owes: $3,600 − $1,200 = $2,400.
- The Penalty: Because she didn't finish, the store adds a backdated penalty of roughly $600 in interest immediately!
5 Part 5: Your Advice for Chef Maya
Maya expects her new bakery to make about $500 per month in profit after paying for flour, butter, and kitchen rent. Answer the three questions below to guide her decision:
1. Which financing option should Chef Maya choose? (Circle one):
[ ] Option A (Credit Card) [ ] Option B (Store 0% Deal) [ ] Option C (Fixed Loan)
2. Give one mathematical reason why you picked that option (compare payments or total cost):
3. What is one smart rule Chef Maya should follow to make sure she never misses a monthly payment?
Smart Shopper Rule: Always calculate the total cost and read the fine print before signing any credit deal!
