Balance Transfer Apr Vs Purchase Apr: What You Need To Know

**Understanding the Difference Between Balance Transfer APR and Purchase APR: A Guide for Consumers**

When it comes to managing your debt, one of the most significant concerns is the interest rate charged on outstanding balances. Two of the most commonly used credit cards in this regard are balance transfer APR (Annual Percentage Rate) and purchase APR (Annual Percentage Rate). While they may seem similar, there’s a crucial distinction between these two rates that can significantly impact your financial situation.

**Purchase APR: The Interest Rate You Pay for Credit**

When you use a credit card to pay for something in cash or make a purchase, the interest rate charged is typically Purchase APR. This rate applies to all purchases made on the credit card and doesn’t take into account any balance transfers made to another credit card with a lower APR.

Here’s an example:

* You have a $1,000 balance on your Visa card with a 22% Purchase APR.
* If you make a purchase online for $500 using your Visa card, the interest rate will be applied to the entire amount: $500 (purchase) + $1,000 (balance) = $1,500.

**Balance Transfer APR: The Interest Rate on Transferred Balances**

When you transfer an existing credit card balance to another credit card with a lower APR, your new card becomes the primary payment source. This is known as a balance transfer. The interest rate charged on these transferred balances is typically Balance Transfer APR (which may be 0% for a promotional period). After the promotional period ends, the regular APR kicks in.

Here’s an example:

* You have a $1,000 balance on your Chase card with a 18% Balance Transfer APR.
* You transfer the same balance to a Discover card with a 0% introductory APR for 21 months (the standard APR is 13.99%).

**Real-World Examples and APRs**

To illustrate the difference, let’s consider two examples:

Example 1: Using a Chase card for groceries and a Discover card for dining out.

* Balance Transfer APR on Chase card: 18%
* Regular APR on Discover card: 12%

If you transfer $2,000 from your Chase balance to the Discover card during the promotional period, your new APR will be 0%. After the promotional period ends, your Chase APR will kick in at 18%.

Example 2: Using a Visa card for online shopping and a American Express card for travel expenses.

* Balance Transfer APR