Purchase APR
Purchase APR refers to the annual percentage rate that a credit card issuer charges on purchases made with the card when the balance is not paid in full by the due date. This is evaluated within APR, Interest & Fees.
Plain-Language Meaning
This is the interest rate applied to the amount you spend on a credit card if you carry a balance from month to month, expressed as a yearly rate.
Practical Example
If you use your credit card to buy groceries and do not pay off the full balance by the statement due date, the purchase APR determines how much interest you will owe on the remaining amount.
What It Does Not Mean
Purchase APR does not apply to cash advances, balance transfers, or penalty rates, which usually have their own separate APRs.
How the System Uses It
The system uses the purchase APR to calculate the interest charges on any unpaid portion of your credit card purchases after the grace period ends, compounding the interest according to the card’s terms.
Common Misconceptions
- “Purchase APR is the same as the interest rate for all transactions.” Purchase APR only applies to standard purchases, not to cash advances or balance transfers.
- “Purchase APR is charged immediately after a purchase.” Interest is only charged if the balance is not paid in full by the due date, after any applicable grace period.
- “Purchase APR never changes.” The purchase APR can change, especially if the card has a variable rate or if the issuer adjusts rates due to market conditions.
Related Pages
Related Glossary Terms
FAQ
- Does the purchase APR apply if I pay my balance in full every month? No, if you pay your full statement balance by the due date each month, no interest is charged on purchases, so the purchase APR does not apply.
- Can my purchase APR increase over time? Yes, the purchase APR can increase due to changes in the prime rate, card issuer policies, or if you trigger a penalty rate by missing payments.