You might be surprised to know that your credit card has more than one interest rate. There’s its buy rate, balance transfer rate, money transfer rate, and cash advance rate. But it’s the credit card purchase rate that dictates the interest you’ll be charged on anything you buy with your card.

So let’s take a look at how a credit card purchase rate works, how it differs from an APR, and what a 0% purchase card is.

What is a credit card purchase rate?

Your credit card purchase rate is the rate applied to any new purchase made on your card. It is commonly referred to as your card’s interest rate. This is because this is the rate you will be charged on any outstanding balance.

It’s important to understand that most credit cards have an interest-free “grace period”. You won’t pay interest on your purchases right away. If you pay off your balance in full and on time, you can avoid paying interest charges.

However, if you leave an unpaid balance on your card – and you have not implemented a 0% purchase promotion period – you will be charged interest at the purchase rate.

How is it different from an APR?

Your APR (annual percentage rate) is the cost of borrowing over an entire year. This is the rate that you will want to look at when you compare credit cards. It will give you the best management of the mandatory fees included on any card.

The APR of your card takes into account the interest as well as all the other costs included with your card. It therefore includes your purchase rate. But that also includes things like annual fees. This is why you may find that your credit card purchase rate is different from your APR.

What are the other credit card rates?

In addition to your buy rate, you will find that your credit card also has a cash advance rate, a balance transfer rate, and a money transfer rate.

Confused? Don’t be.

It is likely that you will primarily use your card for your purchases. But if you plan to use your card to withdraw money (which is not a good idea as you will be charged fees and interest right away) or to transfer a balance, it’s worth knowing what you could. be billed for these transactions.

What is a 0% purchase card?

A 0% purchase credit card is a card that gives you a zero-interest period on purchases for a specified period of time. So, for an agreed upon period, usually several months, you will not be charged the purchase rate of your credit card if you leave an outstanding balance.

This type of card is useful if you want to spread the cost of what you buy over several months. For example, if you need to buy a new sofa, you can use a 0% shopping credit card and pay off the balance over several months. Used correctly, you could avoid paying interest at all!

But the key here is to make sure you pay off the balance before your interest-free period is over. Because if something remains unresolved, your card will revert to the purchase price. And after all, you will have to pay interest charges.

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