The Adventures of Frankie – 16 – Charge!

“Dad,” Frankie whispered out of the corner of his mouth. “Dad,” a little more insistent. “DAD,” he nearly shouted as he tugged at his father’s shirt.

“Yeah, yeah, what?” Dad turned his attention from the wall of fishing lures lined in neat rows.

“Those people are buying some of my worms!” His voice was down to a whisper again, but still very excited.

“Well son, that’s how it works. That’s how Mr. Geddes gets the money to pay you.”

“Yeah, cool, and he owes me $20. Can we stop at the bank and deposit it after he pays me? I’ve got almost enough for my half.”

Frankie’s dad had his hands full keeping his son from bouncing off the walls while waiting for the family in front of them to check out. Obviously they’re new to fishing because they were buying everything; rods, reels, hooks, bobbers, sinkers and a tub of Frankie’s juicy night crawlers. Mr. Dwyer hushed Frankie several times. When the guy pulled out a credit card to pay the bill he literally had to put a hand over his son’s mouth!

After depositing Frankie’s $20 into his very own savings account, he turned his attention back to what went on in the bait shop.

“Did you see that? $300! That’s what my new bike costs and he paid with a credit card!” Frankie didn’t even stop for a breath. “Hey, can we use your credit card to get my bike right now? The store’s right there.” Frankie leaned over and pointed, finger nearly taking off Dad’s nose. “It’ll fit in the back or I can ride it home. I know it’s not like I don’t have to pay for it. I’ll just pay a little more each time Mr. Geddes pays me. Please?”

“Hold on there kid. Credit cards cost money, lots of money. That’s called interest and interest adds up quick.” Dad wasn’t getting through to him so he told Frankie that they would go over the numbers after they got a bite to eat.

With lunch cleaned up, Frankie sat impatiently at the table fiddling with a pencil, waiting for his dad to start the math lesson.

“Now I’m not an accountant, but this is how I understand it. Actually, I’ll simplify all of this a bit. It’s more important that you understand the basic concepts than the actual calculations the banks use. Besides, I think the banks make it so complex that nobody can figure it out.”

“So you don’t trust banks?” Frankie asked.

“I didn’t say that,” Dad tried to defend himself.

“That’s what it sounded like.” Frankie was just trying to understand.

“Never mind that, let’s get started.” Dad was already sounding exasperated.

At the top of the paper Dad wrote “Annual Percentage Rate = 0.20.” He said that some credit cards have high rates and some cards had lower interest rates, but for this example they would use twenty percent. On the next line he wrote “Monthly Percentage Rate” then asked Frankie to divide 0.20 by 12 using his own pad of paper. Frankie complained that the number just kept having sixes forever. Dad told him to round the number to four decimal places. He wrote down Frankie’s number, 0.0167, then explained that this will be used to calculate how much interest he would have to pay the bank each month.

“What do you mean I have to pay the bank interest?” Frankie complained.

“Interest is the time value of money.” Dad leaned back for a moment. “That’s how a bank makes money. They lend you money and until you pay it back you are being charged interest. Our little lesson here will show you just how quickly that adds up.”

Dad’s example showed Frankie borrowing $150 from the bank on his dad’s credit card. The first month of interest was $2.51. By the time Frankie had calculated out a full year he began to understand that using a credit card was not such a good idea. He would have had to pay the bank about $15 in interest.

Frankie leaned back and ran a hand through his hair, “Wow, that’s a lot of extra worms! Guess it’s gonna be a while till I get my new bike.”

“I’ll tell ya what,” Dad said, “You mow the lawn and I’ll pay ya $5. Does that help?”

“Deal!” Frankie jumped to his feet sticking out a hand for his father to shake. “But you’ll have ta start it. That old thing hates me.”

* * *

A few days later, the family went to the hardware store to pick up a few little things. This was a stop the whole family enjoyed, they made a game of it. Lining up at the back of the car, Dad would yell ‘CHARGE!’ then they would pretend to race for the front door.

Dad couldn’t help himself, he had to stop and look at the shiny new mowers lined up outside the front door. “Annette, look at this. It’s on sale.”

“We can’t afford that. Not right now, dear. Wait a few months. It’ll be on sale again.” She started into the store, Frankie’s little brother tugging at her hand.

Floyd called after her, “I’ll just put it on the credit card.”

She stopped in the middle of the doorway, dropping her head in irritation.

Frankie quietly questioned his father, “Have you calculated the cost of the interest?”

Floyd raised both eyebrows then smiled down and shook a finger at him before yelling over to his wife, “ANNETTE, Frankie and I are going to pick out a new lawn mower… spark plug.”