Credit Cards, Excess Debt, and the Time Value of Money: The Parable of the Debt Banana
Timothy Falcon Crack and Helen Roberts
University of Otago, New Zealand

The parable of the debt banana is an analogy between the accumulation of excess personal debt and the accumulation of excess body weight. We created this parable to grab student attention and to then serve as a springboard for discussion of personal debt, time value of money mathematics, the mechanics of credit cards, personal bankruptcy, moral hazard, ethics, and credit card reform. A follow-up survey in a large class
(453 students; 84% response rate) showed that 92% of students seeing the parable alongside the underlying finance principles said that it grabbed their attention more than if the underlying finance principles alone were presented, and 87% of students said it made an impression upon them that will make them more careful in their future credit card spending habits.
We provide worked examples of credit card use as well as a spreadsheet that lets readers explore these examples and perform sensitivity analysis.

INTRODUCTION
The parable of the debt banana is an analogy between the accumulation of excess personal debt and the accumulation of excess body weight. We created and presented our parable in a compulsory Finance 101 course taken by all business majors. Most students had little or no exposure to the world of finance and many had poor mathematical skills. Both their lack of financial sophistication and their natural body consciousness meant that our simple parable was very well received
(see survey responses in Appendix 1).
In theory, young peoples’ use of credit cards should be part of a plan to gain financial independence and to build a good credit score. The reality, however, is that there are altogether too many stories of young people getting into financial