Credit Cards

What Does Purchase Apr Mean For Credit Cards

What Does Purchase Apr Mean For Credit Cards

Ever heard of the term "Purchase APR" and wondered what it means for your credit card usage and finances? Well, you're in the right place! In this Flik Eco article, we will explore the concept of Purchase APR and its impact on your credit card expenses. So, buckle up, and let's dive in!

What Does Purchase Apr Mean For Credit Cards Table of Contents

What is Purchase APR?

What is Purchase APR?

Purchase APR, or Annual Percentage Rate, is the interest rate charged on your credit card balance for any purchases made. In simpler terms, it's the cost of borrowing money via your credit card company for the things you buy. It is expressed as an annual percentage, which can be further broken down into a daily or monthly rate.

How is Purchase APR Calculated?

The APR calculation is determined by the credit card issuer and varies from one credit card to another. It is often based on your creditworthiness, which means cardholders with better credit scores tend to get lower APRs. Your credit card agreement will provide you with the specific Purchase APR for your card.

When Does Purchase APR Apply?

Purchase APR applies to your credit card balance when you don't pay off the entire balance by the due date. This means if you carry a balance from one month to the next, you'll accrue interest charges based on the Purchase APR. Note that if you pay off your balance in full by the payment due date, the Purchase APR does not apply, and you won't pay any interest on the purchases made.

Grace Periods and Purchase APR

Credit card issuers generally offer a grace period, typically 21-25 days from the end of the billing cycle, during which you won't be charged interest on your purchases if you pay your balance in full. This grace period can save you money in interest charges if managed properly.

How to Avoid Paying Purchase APR

  • Pay your balance in full by the due date: Avoid carrying a balance from one month to the next to prevent accruing interest charges.
  • Choose a card with a lower Purchase APR: Shop around for a credit card with a lower APR if you know you may carry a balance at times.
  • Utilize a 0% introductory APR offer: Some credit cards offer a 0% APR for a limited time. Use this opportunity to make purchases without paying interest during the promotional period. Just be sure to pay off the balance before the promotion ends.

What Does Purchase Apr Mean For Credit Cards Example:

Let's say you have a credit card with a Purchase APR of 20%, and you make a purchase of $1,000. If you don't pay off your balance by the due date and decide to carry it for a few months, here's what it would look like:

- Month 1: Balance of $1,000 + ($1,000 x 20% / 12) = $1,016.67

- Month 2: Balance of $1,016.67 + ($1,016.67 x 20% / 12) = $1,033.50

- Month 3: Balance of $1,033.50 + ($1,033.50 x 20% / 12) = $1,050.51

As you can see, the Purchase APR causes your balance to grow, making it more expensive to carry a balance over time. On the other hand, if you paid off your balance in full by the due date, you would not be subjected to any interest charges.

Now that you know what Purchase APR means for credit cards, it's essential to manage your credit card spending and payments wisely. By understanding your Purchase APR and making informed decisions, you can save money on interest charges and maintain a healthy credit score.

At Flik Eco, it's our mission to help you navigate the world of personal finance. Feel free to share this article with friends and family, and check out our other guides for more relevant insights on credit cards, banking, and investments. Together, we can make personal finance accessible and relatable for everyone!


About Jermaine Hagan (The Plantsman)

Jermaine Hagan, also known as The Plantsman is the Founder of Flik Eco. Jermaine is the perfect hybrid of personal finance expert and nemophilist. On a mission to make personal finance simple and accessible, Jermaine uses his inside knowledge to help the average Joe, Kwame or Sarah to improve their lives. Before founding Flik Eco, Jermaine managed teams across several large financial companies, including Equifax, Admiral Plc, New Wave Capital & HSBC. He has been featured in several large publications including BBC, The Guardian & The Times.

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