The purchase APR of a credit card refers to the interest rate applied to outstanding balances if you choose to carry them over time. By understanding how to make the most of an introductory purchase APR offer, you can effectively manage your finances, reduce interest expenses, and benefit from a period of 0% interest on purchases, allowing you additional time to repay high-cost charges.
The purchase APR on a credit card is the interest rate applied to balances carried over from month to month on your credit card purchases. Paying off your full statement balance each month allows you to avoid paying any interest on your purchases.
However, if you have a large purchase and cannot pay it off immediately, it’s worth exploring credit cards with introductory APR offers for purchases. These offers allow you to save on interest by providing a low or 0% APR for a specific period, as long as you pay off the balance within that introductory period. You can better control your spending and possibly reduce your interest costs by being aware of how purchase APR operates and taking advantage of promotional deals.
What is the Purchase APR’s operational structure?
If you carry a balance from month to month and use a credit card, the purchase APR shows the interest rate that the credit card issuer will charge on your purchases. If you don’t pay off your entire balance by the due date, there will be interest applied based on the purchase APR on the remaining balance.
Some credit cards offer promotional or introductory purchase APRs that cut interest rates or even offer 0% APR on new purchases made with the card for a set amount of time. This enables you to make purchases and pay them off during the offer period with a low or no interest rate. The standard purchase APR, which is ordinarily higher than the promotional rate, will take effect after the introductory period, which is limited in time. Both new and old balances will thereafter be subject to the standard purchase APR.
You can reduce interest payments and better manage your credit card debt by being aware of purchase APR and utilizing promotional offers. Any introductory APR offer’s terms and conditions should be carefully read to ensure that you are aware of the promotion’s duration as well as any potential fees or restrictions that might be applicable.
You may be able to significantly reduce your interest payments by taking advantage of an introductory purchase APR deal. Your carrying balance, the length of the promotional period, and the regular purchase APR after the introductory period are all variables that will affect the precise amount you can save.
Let’s take the case where you have a $3,000 balance on a credit card with a typical purchase APR of 19% as an example. You could pay off the sum with 18 months of payments of around $193 each, but you’d also rack up interest costs of about $471.
However, if you use a credit card with an initial 0% purchase APR for the first 18 months, you may pay the full sum down with only a single payment of around $167 per month and pay no interest.
In this case, using the credit card with the introductory 0% APR offer could result in a savings of $471 in interest fees. The precise amount you can save will depend on your individual situation and the conditions of the credit card offer.
By making a purchase at an introductory APR, how much interest can you save?
By taking advantage of an introductory purchase APR offer, you have the potential to save a significant amount of money on interest charges. The exact amount you can save will depend on factors such as the balance you carry, the duration of the promotional period, and the regular purchase APR after the introductory period ends.
For instance, let’s consider a scenario where you have a $3,000 balance on a credit card with a 19% regular purchase APR. If you make monthly payments of approximately $193 over 18 months, you would pay off the balance but also incur around $471 in interest charges.
However, if you use a credit card with an introductory 0% purchase APR for the first 18 months, you can make monthly payments of about $167 and pay off the entire balance without accruing any interest.
In this example, you could potentially save $471 in interest charges by choosing the card with the introductory 0% APR offer. The actual amount you can save will vary based on your specific circumstances and the terms of the credit card offer.
Where can I see the APR once the introductory rate expires?
The contents of that credit card’s terms and conditions should include a table listing the APRs for your card. Each APR, including those for purchases, cash advances, and balance transfers, should be identified with clarity in that portion of the statement.
Purchase APRs: What You Should Know
Before applying for a card with an initial purchase APR deal, you should consider the following things:
Can you settle the balance prior to the intro period’s expiration?
You may have some wiggle room to pay off significant items using an APR offer if you don’t mind shelling out hundreds of dollars in interest. But what happens if you are unable to settle your balance prior to the end of the introductory period?
If you are careless, you might still owe interest on those purchases.
It’s possible for the regular purchase APR to change.
The regular purchase APR that applies after the promotional period expires is variable, which means it can fluctuate from month to month with the prime rate, such as the prime rate published in the Wall Street Journal (an APR that typically doesn’t fluctuate is known as a fixed-rate APR). You should read the card’s terms and conditions. This can help you more clearly understand what to anticipate if you carry a balance in the future.
You may lose a purchase APR deal.
You risk losing the introductory purchase APR if you don’t make your minimum payment each month by the due date printed on your statement. You can also lose the introductory rate for some intro purchase APR deals if, for instance, you exceed the credit limit on your card, pay a bill late, or violate other card rules.
What’s next
Read the terms and conditions of the card before applying for one with an introductory purchase APR offer to learn how long the intro period lasts and what the normal purchase APR will be once the intro period expires.
Paying off the balance before the intro period expires is essential to maximizing the benefits of any intro APR program.