What Is “Purchase APR”? | Credit Cards 101

In this article, we’re answering “What is Purchase APR?” In short, it’s the annual percentage rate that a credit card issuer charges the cardholder when they carry a balance.

We’ll break down the specifics of purchase APR below along with answers to common questions we receive about purchase APR from our members.

This article is part of our free series on credit products in the United States, including how to get US credit cards for foreigners, which you can access here.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

  1. What Is “Purchase APR”?
  2. What Is a Good Purchase APR Rate?
  3. Interest Rates vs APRs
  4. Frequently Asked Questions
  5. Do You Want Help Opening US Bank Accounts?

What Is “Purchase APR”?

Purchase APR refers to the Annual Percentage Rate (APR) that a credit card issuer charges the cardholder when a balance is carried on the card. In other words, it is the interest rate that cardholders pay for the privilege of carrying a balance. 

The Purchase APR is applied to any balance that is not paid by the due date on the account statement each month. This includes new charges along with the existing balance and any accrued credit card interest.

Not surprisingly, each credit card issuer will offer different terms and fees across their credit card products. Likewise, individuals with significantly higher levels of creditworthiness will also receive more attractive rates when comparing credit offers.

It’s also important to note that shopping around and finding the best Purchase APR possible is important when it comes to debt management. However, personal financial management and most financial literacy advocates for not carrying credit card debt at all.

Instead, in financial terms, it’s best to pay off credit card debt as fast as possible and ideally never carry a balance. This is because, in loan terms, credit cards are significantly more expensive when compared to alternative consumer finance options.

With this in mind, if you are looking for a new credit card, make sure you look at the Purchase APR and consider the interest calculation that you may need to pay at a later date.

What Is a Good Purchase APR Rate?

A “good Purchase APR” will depend on the current market rate, the creditworthiness of the applicant, the type of credit card being applied for, and whether any introductory rates are being offered.

Importantly, a wide range of major credit card issuers offer 0% APR introductory offers. These offers give the applicant an opportunity to obtain a credit card and make major purchases with an extended grace period.

Interest Rates vs APRs

The main difference between interest rates and APRs is that interest rates are the direct interest expense of borrowing from a financial institution while APR is the total cost of borrowing on an annualized basis, including interest and additional fees.

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Frequently Asked Questions

Below are a few of the most common questions we receive from people looking into what a purchase APR is. If you have further questions you would like to ask our team, don’t hesitate to get in touch.

What Is APR on Credit Cards?

On credit cards, APR stands for Annual Percentage Rate. This rate is the cost of borrowing money through a credit card when a balance is carried by the cardholder. In addition to the interest charged, the APR also includes the other fees and charges levied by the credit card issuer.

How Does a Purchase Annual Percentage Rate (APR) Work?

The way that a Purchase Annual Percentage Rate (APR) works is that after the due date, the APR is applied to the outstanding balance on the credit card. This outstanding balance includes any new purchases that were made, along with the previous balance, and any interest.

What Is 24% APR on a Credit Card?

24% APR on a credit card is the borrowing cost of using a credit card and maintaining a balance. In other words, if a cardholder maintains a balance on their credit card, they will be charged an annualized rate of 24%.

How Do I Avoid “Purchase APR”?

To avoid Purchase APR, you will need to pay off your credit card in full prior to the due date at the end of each month. This will allow you to continue using the credit card without accruing any interest charges.

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GlobalBanks Team
GlobalBanks Team

The GlobalBanks editorial team comprises a group of subject-matter experts from across the banking world, including former bankers, analysts, investors, and entrepreneurs. All have in-depth knowledge and experience in various aspects of international banking. In particular, they have expertise in banking for foreigners, non-residents, and both foreign and offshore companies.

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