APR and Interest

45-minute agenda

1. 0–5 min

   Warm-up

   Post: “A card charges 24% APR. Is that 24% a month? What would the monthly rate be?”

   Teacher note: No — APR is yearly. 24% ÷ 12 ≈ 2% a month.

2. 5–12 min

   Direct instruction

   Present the lesson slides. Make sure students leave with these points:

   • APR ÷ 12 ≈ monthly interest rate. APR ÷ 365 = daily rate.
   • Minimum payments are mostly interest. Pay more whenever you can.
   • Your statement shows the true cost of paying only the minimum.
   • Deferred interest isn't the same as 0% APR.

   Use the “See it” slide (A $2,000 balance at 22% APR: interest paid) to make the idea visual.

3. 12–17 min

   Worked example

   Walk through “Chris and the $2,000 balance” on the slides. Pause before the result and ask students to predict it.

4. 17–22 min

   Live demo

   Project credit card payoff calculator from the slides or the Credit Card Payoff Calculator. Change one input at a time and have students call out what they think will happen.

5. 22–32 min

   Minimum vs. More

   Format: pairs · 10 minutes

   1. Scenario: a $2,000 balance at 22% APR, with no new purchases.
   2. Pairs predict how long payoff takes paying only the minimum, $100 a month, and $200 a month.
   3. Project the credit card payoff calculator and fill in a table: months to pay off and total interest for each plan.
   4. Pairs write one sentence of advice to someone who only pays the minimum.

   What to look for: Minimum only: about 11 years, 7 months, $2,600 in interest. $100/month: 2 years, 2 months, $514. $200/month: 1 year, $230. (Minimum uses a common formula: 1% of the balance plus interest, at least $25.)

6. 32–37 min

   Check for understanding

   Use the question slides — or run them as a Four Corners game. Answers:

   1. About how much interest is added in one month? — C. About $20
   2. Why does paying only the minimum take so long? — A. Most of each minimum payment goes to interest, so the balance shrinks slowly.
   3. What most likely happens? — D. Interest may be charged on the full $600, back to the purchase date.
   4. If you pay your full statement balance every month, you typically pay no interest on purchases. — True
7. 37–42 min

   Discussion

   • Why do you think minimum payments are set so low?
   • If a friend had a $2,000 card balance, what plan would you suggest?
8. 42–45 min

   Exit ticket

   Prompt: How is “deferred interest” different from a 0% APR offer?

   Answer: With deferred interest, if any balance remains when the promotion ends, you're charged interest back to the purchase date. A 0% APR offer simply charges no interest during the promotion.