# What is Interest Rate?

Interest rate is what percentage a bank or financial institution adds to a principal amount.

### Examples of Interest Rate on a Credit Card

Credit cards can have very high interest rates. Let's say you have a credit card with a 10% interest rate. If you buy an iPhone for $1,000.00, then the bank will apply a 10% interest rate to that amount, which is a $100 fee! This means that soon you owe $1,000.00 + $100 or $1,100.00