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

**Unlocking the Secrets of Credit Cards: A Guide to Balance Transfer APRs and Purchase APRs**

When it comes to managing debt, choosing the right credit card can be a daunting task. Two popular options that often come up are balance transfer APRs (Annual Percentage Rates) and purchase APRs (Annual Percentage Rates). While both may seem similar, they have distinct differences that can affect your financial situation.

**Balance Transfer APR:**

A balance transfer APR is the interest rate applied to a new credit card balance when you transfer existing debt from another credit card. The goal of this transfer is to save money on interest charges by moving high-interest debt to a lower-rate credit card. Here’s how it works:

* You apply for a new credit card with a 0% or low APR (e.g., 6-12 months) promotional rate.
* When you’re ready to pay off your balance, you transfer the amount to the new credit card.
* The old credit card is closed, and you start paying only the interest charges on your new credit card.

**Purchase APR:**

A purchase APR is the interest rate applied to a new credit card for all transactions beyond the introductory period. This means that even if you’re not transferring debt, your current credit card’s APR will still apply. Here’s what happens:

* You use your credit card for purchases and pay the balance in full each month.
* The APR charged on your credit card is higher than the promotional rate.

**Real-World Examples:**

Let’s say you have a credit card with a 10% purchase APR, and you’re due to pay $1,000 in interest. If you transfer this amount to a new credit card with an introductory 6% balance transfer APR, your total interest charge would be:

* 10% purchase APR = $100
* 6% promotional rate = $60 (since 12 months have passed since the promotion)
* Total interest charge = $160

In contrast, if you pay off the entire $1,000 in one month, you’ll avoid paying a single interest charge of $80 ($1,000 – $920).

**APR Figures:**

Here are some APR figures to illustrate the difference:

| Credit Card | Balance Transfer APR (0% or low) | Purchase APR |
| — | — | — |
| American Express Blue Cash Preferred | 12 months = 0%, 6 months = 12.99% |