Lesson S.2 · Start Here: Money Math Refresher
Rates, time and what borrowing really costs
4-minute read · Figures checked October 2026
Photo: RDNE Stock project / Pexels, Pexels License
The short answer
To compare a fee with an interest rate, turn the fee into a yearly rate. Divide the fee by the amount borrowed, then multiply by the number of times that loan period fits into a year. A $15 fee per $100 for two weeks works out to an APR of about 391%. A credit card at 24% APR (example) costs about 2% a month.
Put the money on the same clock first
Pay, bills and borrowing costs run on different clocks. Put them on the same one before you compare.
- Weekly to yearly: × 52.
- Weekly to monthly: × 52 ÷ 12.
- Monthly to yearly: × 12. Yearly to monthly: ÷ 12.
Example (made-up numbers, not a pay guide): $800 a week × 52 = $41,600 a year, or about $3,467 a month. Multiplying by 4 gives only $3,200, because 4 weeks × 12 months counts just 48 weeks.
Seasonal pay changes the count. Example: Luis earns $800 a week, but only for 30 weeks. His year is $800 × 30 = $24,000, or $2,000 a month once it's spread over 12 months. Use the weeks you'll actually be paid, not 52.
APR: the yearly cost of borrowing
APR, the annual percentage rate, puts loans of different sizes and lengths on the same clock. To turn a fee into an APR:
- Divide the fee by the amount borrowed. That's the cost for one loan period.
- Find how many of those periods fit in a year: 365 ÷ the number of days, or 12 for a monthly fee.
- Multiply the two.
Example: a payday loan that charges $15 per $100 for two weeks. $15 ÷ $100 = 15% for two weeks. A year holds about 26 two-week periods (365 ÷ 14). 0.15 × 365 ÷ 14 = 3.91, or about 391% a year. The Consumer Financial Protection Bureau calls it almost 400%.
The fee looks small because the clock is short. A $300 loan with a $45 fee is the same $15 per $100, so it's also 391%. Renewed every two weeks for a year, it would cost 26 × $45 = $1,170 in fees, with the $300 still owed. Never roll one payday loan into another.
| What you're quoted | Turn it into a yearly rate | APR |
|---|---|---|
| Payday loan: $15 per $100 for two weeks | 15% × 365 ÷ 14 | About 391% |
| Title loan: fees that can run 25% a month | 25% × 12 | About 300% |
| Credit card: 24% APR (example) | Already yearly | 24% |
| Credit union Payday Alternative Loan | Already yearly | 28% at most, plus an application fee of $20 or less |
If you truly must borrow, the credit union loan costs far less. Lesson P101.11 covers what to try first.
Simple and compound interest
Simple interest is charged only on what you borrowed. Compound interest is also charged on interest that's been added to the balance, so unpaid interest starts costing interest of its own.
Example (made-up numbers): a $1,000 card balance at 24% APR, which is 24% ÷ 12 = 2% a month. The first month's interest is 2% of $1,000, or $20. Leave it unpaid and the next month's 2% is figured on $1,020. A year of that turns $1,000 into about $1,268: $268 in interest, where simple interest would have charged $240.
Your Move
Do this week
Turn one fee or rate you pay into a yearly cost.
- Pick one: a bank fee, a check-cashing fee, a late fee, a card's APR or a loan.
- If it repeats, find the yearly dollars: weekly × 52, monthly × 12. Example: a $6 weekly fee × 52 = $312 a year.
- If it's a fee to borrow money, turn it into an APR with the three steps above.
- Write the yearly number where you'll see it when you plan next month's budget.
Log it: Yearly cost of one fee.
Common questions
Is the APR the same as the interest rate?
Not always. The APR counts the interest rate plus the lender's fees, so a loan with fees has an APR higher than its rate.
Which matters more, the APR or the dollar cost?
Both. The APR lets you compare loans, and the dollars are what leave your pocket. Before you sign, know the APR, every fee and the total of payments.
How do I turn weekly pay into a monthly amount?
Multiply by 52, then divide by 12. Multiplying by 4 counts only 48 weeks, so it comes out short.
Free help
- Consumer Financial Protection Bureau: What is a payday loan?
- Federal Trade Commission: What to know about payday and car title loans
- National Foundation for Credit Counseling (NFCC), nonprofit credit counseling: 877-360-6322 or nfcc.org
Free practice
Lesson check
5 questions on this lesson, one at a time, with the answer and the reason after each. Pass with 4 right, including every must-know question.
This is general education, not tax, legal, investment or insurance advice. Rules change and every situation is different. Check the sources below, and talk to a qualified professional before you act on it.
Sources
- Consumer Financial Protection Bureau: What is a payday loan?
- Consumer Financial Protection Bureau: What is the difference between a loan interest rate and the APR?
- Federal Trade Commission: What to know about payday and car title loans
- National Credit Union Administration: Payday Alternative Loans final rule, 2019