Cost of credit Suppose you need to invest $1000 in a new car for one year. If you charge it to the Silver Axxess Visa Card, what is the total cost of the credit, taking into account the fact that you would be charged both interest and an annual fee? Given that the annual percentage rate (APR) r = 19.92% = 0.1992, you can compute I = Pr = $1000 * 0.1992 = $199.20. The annual fee is $48. The total cost would be the interest (I) plus the annual fee: $199.20 + $48 = $247.20. Expressed as a fraction of the principal, this is almost 25 percent. And that is not the worst offer, as the next exercise will make clear.