What does purchase APR mean and how does it work?

A purchase annual percentage rate (or APR) is the interest rate that’s applied to credit card purchases. This interest rate typically kicks in when you carry over some of what you owe on purchases from month to month.

If you pay off your full statement balance on time each month, you can avoid paying any interest on those purchases.

But if you’ve got a big purchase coming up and you don’t have the cash on hand to pay for all of it at once, consider looking around for a better deal. Some cards come with an introductory APR for purchases that can help you save money on interest — as long as you pay your purchases off on time and in full before the introductory period ends.

Here’s some key things to know about how purchase APR works and how an introductory purchase APR offer can help you pay off new purchases with low-to-no interest.

How does a purchase APR work?

Credit card companies charge interest according to a card’s annual percentage rates. There are several different types of interest rates that you may be charged by your credit card company.

The purchase APR is the rate of interest the credit card company charges on purchases you make with the card if you carry a balance on the card, which is what it’s called when you don’t pay off your balance on your monthly statement and roll it over onto the next month’s bill.

But some credit cards come with purchase APR promotions that offer an introductory purchase APR or low interest rate on new purchases made with the card for a set amount of time. You may see intro APRs for purchases that last anywhere from just a few months to 21 months or more.

If you’re considering an introductory purchase APR offer, you may be able to pay off new purchases at a lower interest rate — sometimes even as little as 0% APR. Once the promotional time frame ends, the regular purchase APR will take effect. This is usually a higher interest rate that you’ll begin paying on both new purchases and existing purchases that you haven’t paid off before the intro period ended.

How much can you save on interest with an introductory purchase APR?

Possibly hundreds of dollars or more, depending on your situation.

For example, let’s say you use Card A, which has a relatively high purchase APR of 19%, to buy $3,000 worth of furniture. If you made monthly payments of about $193 for 18 months, you’d pay the balance off assuming you didn’t make any additional purchases on the card. But you’d also pay about $471 in interest thanks to the regular purchase APR.

On the other hand, if you can use Card B, which is offering an introductory 0% purchase APR for the first 18 months you have the card, you could make 18 monthly payments of about $167 and pay off the balance without paying a penny of interest if you make timely monthly payments.

Where do I find the APR that takes effect once the introductory rate ends?

You should see your card’s APRs listed in a table as part of the details of that credit card’s terms and conditions. Each APR, like those for balance transfers, cash advances and purchases, should also be identified clearly in that section of information.

Things to know about purchase APRs

You’ll want to take a look at a couple of factors before applying for a card with an intro purchase APR offer. Here are a few things to check for …

Can you pay off the balance before the intro period ends?

A promotional purchase APR offer can give you some breathing room to pay off large purchases without forking over hundreds of dollars in interest. But what happens if you can’t pay off your balance before the introductory period ends?

If you’re not careful, you could wind up owing interest on those purchases anyway.

The regular purchase APR may be variable

You should read the card’s terms and conditions to find out whether the regular purchase APR that takes effect after the promotional period ends is variable, meaning it can change from month to month with the prime rate, such as the prime rate published in the Wall Street Journal (an APR that typically doesn’t fluctuate is known as a fixed-rate APR). This can give you a better idea of what to expect if you carry a balance later.

You can lose a purchase APR offer

If you don’t make your monthly minimum payment by the due date on your statement each month, it’s possible to lose the introductory purchase APR. You could also lose the promotional rate for some intro purchase APR offers if — for example — you go over your card’s credit limit, make a late payment or break other card terms.

Bottom line

Before you apply for a card with an introductory purchase APR offer, read the card’s terms and conditions to find out how long the intro period lasts and what the regular purchase APR will be once the introductory period ends.

A key to making any intro APR offer work in your favor is paying off the balance before the intro period ends.