What Is Purchase APR?

When you take out a loan of any kind — a car loan, personal loan or mortgage, for example — the terms of that loan will include a figure called the APR, or annual percentage rate. That percentage indicates the amount of interest you’ll pay on a loan in one year.

Every time you use a credit card, you’re essentially taking out a loan. The issuing bank behind each credit card pays for your purchases, and in turn, you pay the bank back. As such, credit cards charge what’s called a purchase APR on the money they lend you.

Here’s what to know about purchase APR, including how to avoid paying it.

What is purchase APR?

As the name suggests, purchase APR is the amount of interest you may pay on purchases made with your credit card. Purchase APR is expressed as a percentage — say, 18.74%, as a random example.

With credit cards, unlike other types of borrowing, the term “purchase APR” means the same thing as “interest rate.”

Purchase APR is distinct from and should not be…

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This article was written by Jae Bratton and originally published on www.nerdwallet.com