What is a purchase APR?

When you borrow money — whether you’re making a purchase on a credit card, applying for a car loan or taking out a mortgage — your bank or credit issuer has the right to charge interest on the money you borrow in the form of an annual percentage rate. The most common interest rate associated with credit card purchases is your purchase APR.

In most cases, a 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 complicate credit card APRs. Here’s what to know about your card’s purchase APR and how it relates to other APRs your issuer might charge.

What is a purchase APR?

A card’s purchase APR is the yearly interest rate that your issuer applies to purchases you make with the card. Along with other factors, this number encompasses the interest that a balance would accrue over a year based on the card’s pay periods. If you need to carry a balance on a credit card, the purchase APR is an important number to keep in mind, as it can make a huge difference in how much interest you’ll pay over time.

Here’s a spending example with two cards that each get charged with a $3,000 purchase and get paid down at $200 a month:

Even though your APR increased by just 10 percent for Card B, the total interest you pay nearly doubles from $343 to $634 — and takes longer to pay off in the process. If you’re planning on making a large purchase and want to see how each of your card’s APRs could change what you pay in the long run, use Bankrate’s credit card payoff calculator to help.

Other types of APR

Making new purchases is the most common type of credit card transaction, so a purchase APR is usually the most important figure to remember. But there are several circumstances when a different APR may apply, such as the:

• Balance transfer APR. Debt transferred from another credit card (known as a balance transfer) may have a different APR than new purchases.
• Cash advance APR. Money you take out as a cash advance may also have its own APR, and it’s usually higher than the purchase APR. It also typically starts accruing immediately with no grace period.
• Introductory APR. To entice new cardholders, credit card issuers often offer 0 percent APRs on purchases, balance transfers or both for a limited time.
• Penalty APR. This can kick in after you fail to make payments for a certain period of time, usually around 60 days. At this point, your regular purchase APR will be replaced with the higher penalty APR, and it will typically apply to your existing and future balances for at least six months.

What to know about purchase APRs

As noted above, a purchase APR dictates how much interest you’ll be charged should you fail to pay off a purchase in full and carry a balance from month to month instead.

APRs are usually variable, meaning your purchase APR can shift up or down depending on the U.S. prime interest rate. It’s possible, but unusual, to have a fixed APR, which means it’s not affected by the prime rate.

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 the section labeled “Interest Charge Calculation” on your monthly credit card statement.
• Check your online account or app. You can also find your purchase APR by logging in to your credit card account and reviewing your credit card details. You can even 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 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.

How much can you save with an introductory purchase APR?

If the card you’re considering offers a lower introductory APR than your regular purchase APR, you could save big on interest charges within the introductory period. In many cases, these credit cards will offer 0 percent interest for between 12 to 21 months.

Let’s go back to the spending example we used previously:

If you make a $3,000 purchase on a credit card with an 18-month 0 percent intro APR offer, those same $200 monthly payments will knock out your debt in 15 months. This means you won’t pay any interest on that balance, since you’ll have your balance paid off in full before your introductory APR period expires.

The best 0 percent APR credit cards can help you pay down any balances you charge (or transfer) to the credit card before the 0 percent introductory rate expires. When your introductory 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.

The bottom line

A purchase APR is the interest rate that applies to purchases you make with a credit card. Other transactions, like cash advances and balance transfers, may have different APRs.

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 introductory period expires. If you want to know your current purchase APR, check your credit card statement or log in to your account.