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Your Practice. Popular Courses. Personal Finance Credit Cards. The purchase APR is the interest charge added monthly when you carry a balance on a credit card. Most credit cards have several APRs attached. Different rates for cash advances and purchases are common. Article Sources. Investopedia requires writers to use primary sources to support their work.
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Update your browser. It appears your web browser is not using JavaScript. Without it, some pages won't work properly. Please adjust the settings in your browser to make sure JavaScript is turned on. Understanding how you're charged interest on your credit card is the key to knowing how to manage your card debt. Here's how it works. Credit cards charge interest on any balances that you don't pay by the due date each month.
When you carry a balance from month to month, interest is accrued on a daily basis, based on what's called the Daily Periodic Rate DPR. DPR is just another way of saying what your daily interest charge is. That's calculated by taking your credit card's Annual Percentage Rate APR and dividing it by , for all the days in the year. The reason why credit card balances can quickly build up on cards with high APRs is because of compounding interest charges that occur on a daily basis.
At the end of each day, the interest charge is calculated and added to your balance for the next day. This continues every day for the billing period, so the interest you're charged one day becomes part of the balance on which interest is charged the next day, and so on.
At the end of the month, the lender will add up all of these daily interest charges and put it on your card as a finance charge. Bank of America, N. Member FDIC. Equal Housing Lender. Close 'last page visited' modal Welcome back. Here's where you left off. Show related content Don't show me this pop-up of the page I left off on again. You might also be interested in:. Skip to main content. My Priorities Search. Trending Building credit and keeping yours healthy How to build credit from scratch Building your credit with a secured credit card.
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Personal Banking. Share Close share. When a lender decides the APR on a credit card, it typically considers several things about a borrower, including their credit report, credit score, income and employment history. Many lenders use credit scores as an initial screen to help match applicants to different cards and interest rates. Applicants with higher credit scores typically are offered a lower APR. APRs are great for comparing credit card offers, but the best credit card interest charges are the ones you don't pay at all.
By understanding the grace period and managing your balances carefully, you can keep your interest payments at or close to zero no matter what the interest rate is on your card. Apply for credit cards confidently with personalized offers based on your credit profile.
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