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

**Understanding the Difference Between Balance Transfer APR and Purchase APR**

When it comes to managing your debt, choosing the right credit card can be a crucial decision. Two popular options are balance transfer credit cards and purchase credit cards, both of which offer attractive promotional rates for limited time periods. However, understanding the differences between these two types of credit cards is essential to making informed financial decisions.

**Balance Transfer APR vs Purchase APR: What’s the Difference?**

The main difference between balance transfer credit cards and purchase credit cards lies in the interest rate they charge on new purchases versus existing balances. When you apply for a balance transfer credit card, you’re allowed to transfer your outstanding balance from another credit card or loan at a lower introductory APR (Annual Percentage Rate) for a specific period, usually 6-21 months. Once the promotional period ends, the regular APR kicks in.

On the other hand, purchase credit cards charge a regular APR on all purchases after the initial promotional period has ended. This means you’ll be charged interest on your outstanding balance from the moment you make a new purchase with the card.

**APR Figures: A Comparison**

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

* Balance transfer credit card:
+ Introductory APR: 0% (6 months)
+ Regular APR: 18.99%
* Purchase credit card:
+ Regular APR: 23.49%

In the first example, you can save up to $90 in interest by transferring your balance to a lower-interest credit card and paying it off within 6 months.

On the other hand, if you choose a purchase credit card with a regular APR of 23.49%, you’ll be charged interest on your entire outstanding balance from the moment you make a new purchase.

**Real-World Examples:**

Consider Sarah, who wants to transfer her $2,000 balance from her old credit card to a lower-interest credit card for 6 months. She applies for the new credit card and is approved with an introductory APR of 0% (6 months). Throughout this period, she saves $90 in interest. After 6 months, the regular APR kicks in, and Sarah’s interest payments become due.

Meanwhile, John, who wants to buy a new laptop, chooses a purchase credit card with a regular APR of 23.49%. He makes multiple purchases on his new credit card throughout the year, accumulating an outstanding balance of $1,500. When he applies for a