Interest on credit card balances is usually expressed as an APR (annual percentage rate). If you leave a principal balance unchanged for a year at that APR, the simple multiplication gives the nominal interest cost for the year. For the example used in the quiz: 5000 × 0.18 = 900, so a $5,000 balance at an 18% APR will generate about $900 in interest over one year if the principal remains the same and interest is assessed at that nominal rate. This arithmetic makes the otherwise abstract percentage tangible: $900 is real money diverted to interest rather than paying down principal or saving. In most real-world situations interest compounds (daily or monthly) which slightly increases the total interest above the simple APR × principal amount; that makes the cost even larger if you only make minimum payments. The big lesson is that carrying high-rate revolving debt quickly becomes expensive, so strategies to reduce the rate or the principal are valuable.

There are multiple practical responses: prioritize paying more than the minimum to cut interest costs, consider balance-transfer offers (but check transfer fees and the length of 0% promotions), and explore consolidation into a lower-interest personal loan if the total cost and term make sense. Also factor in compounding frequency: a card that compounds daily will cost a bit more than the simple APR × principal; amortization calculators and payoff planners can show exact timelines and total interest paid under different payment strategies. Additionally, build an emergency fund to reduce the chance of re-accumulating high-interest balances. Finally, if the balance is a recurring pattern, review the budget to find structural causes (overspending, insufficient income, irregular large expenses) and address those root causes instead of repeatedly borrowing to cover them.