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

**Balancing Act: Understanding the Difference Between Balance Transfer APR and Purchase APR**

When it comes to managing your credit card debt, choosing the right balance transfer credit card can make all the difference between financial freedom and financial entanglement. Two popular options that often get mixed up 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 you with the financial details and real examples to help you make an informed decision.

**Purchase APR: The Hidden Enemy**

The Purchase APR is the interest rate charged on your credit card for purchases made. It’s usually the highest rate on your balance, which means that if you carry a $1,000 balance on your card, you’ll pay interest on that amount at a rate of 20% per annum. For example:

* If you have a $1,000 balance and an Purchase APR of 22%, you’ll pay $200 in interest over the first year.
* Assuming you make bi-weekly payments, it may take you 10 months to pay off your debt.

**Balance Transfer APR: A New Chapter**

The Balance Transfer APR is the interest rate charged on your credit card for transferring balance from one card to another. When you apply for a new balance transfer credit card, you’ll typically be offered a promotional APR that’s significantly lower than your current Purchase APR (e.g., 0% or 1% APR for six months). This introductory APR is usually only available if you pay off the full balance within a specified timeframe.

* If you have a $1,000 balance and apply for a new Balance Transfer credit card with an introductory APR of 0% for 18 months, your monthly payment would be just $44.
* Assuming you make bi-weekly payments, it may take you about three years to pay off the debt, but you’ll avoid paying interest on that amount.

**Real-World Examples**

Let’s consider a real example:

* Credit card A: Purchase APR of 22%, Balance Transfer APR of 0% for 18 months
* Credit card B: Purchase APR of 20%, No Introductory APR

If you carry $2,000 balance on Credit card A and apply for Credit card B with an introductory APR of 0% for 18 months, your monthly payment would be just $36. After the promotional period ends, your new Balance Transfer APR will kick in at