The big ideaA P R is the yearly price of owing, as a percent of what is owed.
How it works
APR means annual percentage rate: the yearly price of owing, as a percent of what is owed. Percent means out of one hundred, so 20 percent is 20 in every 100.
For Ana, who owed 60 coins, 20 percent means 2 extra for every 10 owed. Sixty is six tens, so a whole year costs 12 extra.
The yearly price is shared across the months: six months costs 6, three months 3, one month 1. Think of three things multiplied: the coins owed, the percent and the time.
In Larkspur, paying the whole bill by the due day adds no extra, so the APR matters when something is left owing. On an offer, ask three things: the APR, the due day and any fee.
Ana's card and Ben's card, for 60 coins owed a year.
📈the APR📅the due day🏷️any fee
Three lines worth reading on a card offer.
Example 1: A whole year
Ana owes 60 coins at 20 percent.
That is 2 extra for every 10 owed, and 60 is six tens.
6 × 2 = 12, so the year costs 12 extra coins.
Example 2: Half a year
Ana owes the 60 for half a year.
The extra is half of 12.
12 ÷ 2 = 6, so it costs 6 extra coins.
Example 3: Ben's lower APR
Ben's card says 10 percent.
That is 1 extra for every 10, and 60 is six tens.
6 × 1 = 6, so Ben pays 6 extra, not 12.
A lower APR costs less for the same coins and time.
Example 4: Not 20 coins a month
20 percent is a yearly price.
On 60 coins that is 12 for the whole year.
12 ÷ 12 = 1, so it is about 1 coin a month.
Words to know
APR
Annual percentage rate: the yearly price of owing.
percent
Out of one hundred.
due day
Pay in full by then and there is no extra here.
fee
A charge on an offer, like a late fee.
Watch out
20 percent a year is not 20 coins a month.
The percent is not the number of coins. 10 percent of 60 is 6, not 10.
A shiny banner or a colorful card does not change what an offer costs.
Time matters: the same APR costs more the longer something is owed.
Try it
60 coins owed for a year at 10 percent. How much extra?
60 coins owed for 3 months at 20 percent. How much extra?
Which costs less for the same coins and time: 20 percent or 10 percent?
Name the three things to ask about on a card offer.
Answers: 1. 6 · 2. 3 · 3. 10 percent · 4. The APR, the due day and any fee
Try at homeWith a grown-up, find the A P R on a sample card offer from a website, and work out the extra on sixty pretend coins for one year.
For grown-upsPretend coins and a made-up village. Ask your child to work out the extra for 60 coins at 10 percent for a year, then for six months. Tutorpip's own credits never earn interest.
Open these notes on screenScan the code, or go to tutorpip.com.