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 (APR). 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 an example of how purchase APR changes the amount you’d pay on these two cards, each with a $3,000 purchase charged and each being paid off with $200 monthly payments:

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 one credit card to another (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 low APRs or 0 percent APRs on purchases, balance transfers or both for a limited time. This is referred to as an introductory APR. After the intro period ends, the card’s regular balance transfer or purchase APR will kick in. 
• 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 choose not to pay off a purchase in full and carry a balance from month to month instead.

You can lose your current purchase APR, however, should you miss your monthly minimum payment for 60 days or longer. Doing so could lead to your issuer charging you a penalty APR. To avoid this scenario, always be sure to make your minimum credit card payment on time.

APRs are usually variable, meaning your purchase APR can shift up or down depending on the U.S. prime interest rate, which is controlled by the Federal Reserve. It’s possible to have a fixed APR for your credit card, which means it’s not affected by the prime rate. However, fixed APR credit cards are becoming increasingly rare, so you’re not likely to find one among today’s top cards. 

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 on purchases (or balance transfers) for between 12 and 18 months, but the best 0 percent APR credit cards offer introductory periods of 21 months. This allows cardholders to save because they won’t be paying interest on any credit card balance they carry for that time frame. 

But 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.

Intro APR spending example

Let’s go back to the spending example we used previously but add a 0 percent introductory APR credit card to the mix. Let’s say this card, which we’ll call Card C, offers a 0 percent intro APR on purchases for 18 months from account opening. If you make a $3,000 purchase on the card and pay that same $200 a month, here’s what your payment plan would look like:

You’ll not only pay off your $3,000 purchase sooner, but you’ll also do so without paying any interest.

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.