APR Explained | How Credit Card Interest Works Lesson

A lesson for students on how APR (Annual Percentage Rate) influences credit card interest, its compounding effects, and strategies for smart credit card use.

Students learn the intricacies of APR and how it impacts credit card users. They dive deep into understanding the true price of borrowing money on a credit card and how interest accumulates. They grasp the difference between a straightforward annual percentage and the compounding effect of daily periodic rates. Students also discover the significance of terms like “introductory APR” and “balance transfer APR,” understanding their role in financial decisions. Additionally, the video emphasizes the importance of paying off the full balance each month, highlighting the benefits of credit cards when used responsibly, such as cashback, rewards, and building credit history.


Use this video lesson on the topic of APR basics. Learn related concepts of:

  • Credit Card Debt
  • Interest Calculations
  • Financial Decisions
  • Debt Management
  • Interest Comprehension
  • Credit Literacy
  • Financial Planning
  • Repayment Strategies


9-12th grades. High School. College. Adult Education.


45-60 minutes. Adjust the lesson plan and allocate time to certain topics based on the needs and interests of the students.


Hand out the worksheet below (see the GET LESSON button near the bottom of the page).

Show students the video and have them complete the worksheet.  Review the questions on the worksheet.  A more comprehensive and detailed lesson plan can be accessed below for further instruction and study.

APR Explained: How Does Your Credit Card Interest Work?

After watching the video, have students tell what the most important things they learned from the video.


Lesson Plan: APR Explained


By the end of this lesson, students will be able to understand and explain the concept of APR, how it affects credit card debt, and its implications on personal finance.


  • Video titled “APR Explained: How Does Your Credit Card Interest Work?”
  • Projector or screen to show the video
  • Notebooks and pens/pencils for students
  • Whiteboard and markers
  • Handout with quiz questions

Introduction (5 minutes):

  1. Ask students: “How many of you have a credit card or are thinking of getting one?”
  2. Briefly discuss why understanding APR is crucial when managing credit card debt.

Video Presentation (Duration of the video):

  1. Play the video “APR Explained: How Does Your Credit Card Interest Work?”

Discussion and Activities (25 minutes):

Activity 1: APR Discussion (10 minutes)

  1. Start a discussion by asking, “What is APR?” Encourage students to share their understanding.
  2. Ask, “Why is it important to understand APR when dealing with credit cards?”
  3. Discuss the difference between APR and interest rate.

Activity 2: APR Calculation (10 minutes)

  1. On the whiteboard, write down a hypothetical credit card balance and an APR.
  2. Walk students through the calculation of the interest for one month.
  3. Divide students into pairs and give each pair a different balance and APR. Have them calculate the monthly interest.
  4. Allow pairs to share their calculations and answers.

Activity 3: Real-life Implications (5 minutes)

  1. Discuss scenarios such as making only the minimum payment on a credit card vs. paying off the full balance.
  2. Ask students how understanding APR can influence their credit card usage and payment behaviors.

Quiz (10 minutes):

  1. Hand out the quiz questions based on the video.
  2. Allow students 5 minutes to complete the quiz.
  3. Briefly review and discuss the answers.

Conclusion (5 minutes):

  1. Reinforce the importance of understanding APR and its implications on personal finance.
  2. Encourage students always to read the fine print when considering credit card offers and to be mindful of their spending and repayment habits.

Homework/Extension Activities:

  1. Research and write a short essay on the history of credit cards and how APR has evolved over time.
  2. Create a personal budget that includes a plan for credit card spending and repayment, keeping APR in mind.
  3. Interview a family member or friend about their understanding of APR and their credit card habits. Write a reflection on the insights gained from the interview.

Lesson Resources

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For additional related lessons, explore our main category pages:

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