When you borrow money, your bank or credit issuer has the right to charge interest on any money you borrow. In the case of credit cards, this interest often comes in the form of purchase APR. Although purchase APR is not the only type of interest rate that a credit card issuer might charge, it is the most common interest rate associated with credit cards.
In general, purchase APR is the interest applied to any credit card purchases that aren’t paid off in full before the credit card grace period ends. However, there are a lot of other factors—like introductory rates or penalty rates—that can make credit card APR a little more complicated.
What is purchase APR?
The regular purchase APR is the interest rate applied to purchases as long as no other APR takes precedence. APR is usually a variable interest rate. This means that your purchase APR could shift up or down slightly depending on the prime interest rate—but don’t worry. In most cases, you won’t even notice the change.
If you’re planning to carry a balance on a credit card, the purchase APR is an important number to keep in mind. It can make a huge difference in how much interest you’ll pay over time.
For example, if you make a $3,000 purchase on a card with a 15 percent APR, with $200 monthly payments, you’ll pay off your balance in 17 months and pay a total of $343 in interest. If, instead, you make the purchase on a card with a much higher 25 percent APR, it will take an extra two months to pay off your debt with the same monthly payments, and you’ll pay almost double the interest—a total of $634.
How much you can save with an introductory APR
Some credit cards offer introductory APRs that are lower than the regular purchase APR. In most cases, these credit cards will offer 0 percent interest for a specific period of time—often for 12 or 18 months.
Let’s go back to the example above of a $3,000 purchase. If you put that on a credit card with a 0 percent intro APR period for 18 months, those same $200 monthly payments will knock out your debt in 15 months before the regular APR kicks in, meaning you won’t pay any interest on that balance. Compare that to the same monthly payment with an average interest rate of 16 percent, and it will take you 17 months to pay off your debt, and you’ll spend $369 in added interest.
Introductory APR credit cards are great for people who can pay down any balances they charge (or transfer) to the credit card before the 0 percent introductory rate expires. When your intro APR period ends, the credit card issuer will begin applying the regular purchase APR to any balance remaining on the card, as well as any new purchases you charge.
How to find your current purchase APR
There are two ways to find your current purchase APR.
- Read your monthly credit card statement: Your current purchase APR can be found in a section labeled “Interest Charge Calculation” on your monthly credit card statement.
- Check your online account: You can also find it by logging into your credit card account online or through the issuer’s app and reviewing your card details. Additionally, you can use your online account to pull up your most recent credit card statement.
If your credit card is currently offering a promotional or introductory APR, your statement will also let you know how much longer the promotional APR will last. That way, you can be prepared to pay interest on any balances remaining after your 0 percent intro APR ends. Learning how to read your credit card statement will help in this process.
The bottom line
Knowing how credit card purchase APR works can help you make smart decisions about which credit card to choose and how quickly to pay off your credit card balances. Remember that the regular purchase APR applies when no other interest rate takes precedence. If your credit card has an introductory interest rate, for example, the regular purchase APR will kick in when the intro rate expires. If you want to know your current purchase APR, check your credit card statement or log in to your account.