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

**Understanding Balance Transfer APR vs Purchase APR: A Guide for Consumers**

When it comes to managing credit cards, understanding the terms and conditions of your debt can make all the difference in saving money and avoiding unnecessary fees. Two key concepts that are often confused with each other are Balance Transfer APR (Annual Percentage Rate) and Purchase APR (Annual Percentage Rate). In this article, we’ll break down the differences between these two rates, providing real examples and actionable advice to help you make informed decisions.

**Balance Transfer APR vs Purchase APR**

The main difference between these two rates is how they’re calculated. The Balance Transfer APR is typically lower than the Purchase APR because it’s designed for transferring balance from one credit card to another. This rate is usually higher on new accounts, as merchants and financial institutions take advantage of the opportunity to earn more interest.

On the other hand, the Purchase APR applies to all purchases made after opening a new credit account. It’s often higher than the Balance Transfer APR because it covers not only balance transfers but also new purchases.

**APR Figures: A Breakdown**

To put things into perspective, here are some common APR figures:

* 12-month interest rate for new accounts: 14.99% (e.g., American Express Platinum Card)
* 18-month interest rate for balances transferred after opening a new account: 15.49%
* 24-month interest rate for purchases made after opening a new account: 22.19%

**Real Examples**

Let’s consider an example to illustrate the difference:

John pays off his credit card balance in full each month, earning 0% APR on his regular purchases during promotional periods (e.g., Chase Sapphire Preferred Card with 60-month introductory period). However, if he wants to transfer $2,000 balance from another credit card to this new one, he’ll be charged a Balance Transfer APR of 6.99%.

In contrast, if John opens a new Chase Sapphire Preferred Card and transfers his $2,000 balance, he’ll earn 0% APR for the first 18 months on that new purchase.

**Actionable Advice**

To avoid unnecessary fees and save money, consider the following:

* When transferring balance from one credit card to another, choose a Balance Transfer APR of 6.99% or less.
* If you’re opening a new account with a Purchase APR, opt for a lower rate (e.g., 15.49%) if possible.
* Avoid taking advantage of promotional