What is purchase APR, and how does it work?

A purchase annual percentage rate (or APR) is the interest rate that’s applied to credit card purchases. This interest rate typically kicks in when you carry a balance from month to month.

If you pay off your full statement balance on time each month, you can avoid paying any interest on those purchases.

But if you’ve got a big purchase coming up and you don’t have the cash on hand to pay for all of it at once, consider looking around for a better deal. Some cards come with an introductory APR for purchases that can help you save money on interest — as long as you pay your purchases off on time and in full before the introductory period ends.

Here’s some key things to know about how purchase APR works and how an introductory purchase APR offer can help you pay off new purchases with low-to-no interest.

How does a purchase APR work?

Credit card companies charge interest according to a card’s annual percentage rates. There are several different types of interest rates that you may be charged by your credit card company.

The purchase APR is the rate of interest the credit card company charges on purchases you make with the card if you carry a balance on the card. A balance is what it’s called when you don’t pay off your monthly statement and instead roll some or all of it over onto the next month’s bill.

But some credit cards come with purchase APR promotions that offer an introductory purchase APR on new purchases made with the card for a set amount of time. You may see intro APRs for purchases that last anywhere from just a few months to 21 months or more. This means that during the intro purchase APR time frame, if you carry a balance, you won’t accrue interest. But a purchase APR offer doesn’t apply to balance transfers — and though you won’t be charged interest, you should make sure to pay at least the minimum balance each month to avoid late fees or other repercussions.  

If you’re considering an introductory purchase APR offer, you may be able to pay off new purchases at a lower interest rate — sometimes even as little as 0% APR. Once the promotional time frame ends, the regular purchase APR will take effect. This is usually a higher interest rate that you’ll begin paying on both new purchases and existing purchases that you haven’t paid off before the intro period ended.

Types of credit card APRs

Depending on your credit card, you can have quite a few different APRs. Here’s a quick breakdown. 

• Fixed APR — This APR will not fluctuate month to month. Your credit card issuer can adjust the rate, but it must notify you before any change occurs. A fixed APR can apply to balance transfers and purchases. It’s rare that credit cards have fixed APRs.
• Variable APR — This type of APR changes with the index interest rate. Variable APRs can apply to balance transfers and purchases made on your card. Most credit cards charge variable, rather than fixed, APRs.
• Purchase APR — This is the interest you’ll be charged if you carry a balance on new purchases. Some cards offer introductory purchase APRs at a lower rate than the ongoing APRs.
• Balance transfer APR — This is the interest you’ll pay on any balance transfers made to your credit card that carry a balance month to month. Some cards offer introductory balance transfer APRs at a lower rate than the ongoing APRs.
• Penalty APR — You may be charged a penalty APR if you’re 60 days late paying your credit card — or take any other action outlined by your cardholder agreement that allows your issuer to charge this APR. Any purchase or balance transfer APRs would be replaced by this penalty APR for an extended period of time. This would also apply to any intro rates. 
• Cash advance APR — This is the interest you’re charged on any cash advance transactions you make with your credit card.

How to find your purchase APR

You should be able to see your card’s APR listed in the terms and conditions of your credit card — it’s typically listed in a table along with the other APRs on your card. Each APR, like those for balance transfers, cash advances and purchases, should also be identified clearly in that section.

If you’re having trouble finding the terms and conditions, you can also look at your most recent credit card statement — any online or paper statement should have this info. Your credit card issuer’s customer service line should also be able to help you find this information.

How to avoid purchase APR

Every credit card comes with a purchase APR, but there are some strategies to avoid incurring any interest. 

• Pay your full statement balance each month
• Set up autopay to avoid missing any due dates
• Apply for a card with an introductory purchase APR for larger purchases

One of the best ways to ensure you don’t pay any interest on your purchases is to pay off your credit card in full every month. If you’re able to, creating and sticking to a budget to make sure you’ll have enough funds to cover your bills each month is a great place to start.

Things to know about purchase APRs

You’ll want to take a look at a couple of factors before applying for a card with an intro purchase APR offer. Here are a few things to check for …

Can you pay off the balance before the intro period ends?

A promotional purchase APR offer can give you some breathing room to pay off large purchases without forking over hundreds of dollars in interest. If you can’t pay off your balance before the introductory period ends, you’ll start accruing interest for — at minimum — any remaining balance.

The regular purchase APR may be variable

You should read the card’s terms and conditions to find out whether the regular purchase APR that takes effect after the promotional period ends is variable, meaning it can change from month to month with the prime rate, such as the prime rate published in the Wall Street Journal. This can give you a better idea of what to expect if you carry a balance later.

You can lose a purchase APR offer

If you don’t make your monthly minimum payment by the due date on your statement each month, it’s possible to lose the introductory purchase APR. You could also lose the promotional rate for some intro purchase APR offers if — for example — you go over your card’s credit limit, make a late payment or break other card terms.

Bottom line

Before you apply for a card with an introductory purchase APR offer, read the card’s terms and conditions to find out how long the intro period lasts and what the regular purchase APR will be once the introductory period ends.

A key to making any intro APR offer work in your favor is paying off the balance before the intro period ends.