What Is Purchase Apr For Credit Cards And How To Lower Yours

What is the definition of Purchase APR for Credit Cards?

APR is short for Annual Percentage Rate. On whatever debt you could carry forward to the following month's credit card payment, this is the rate charged. Usually, there are two forms of APR: the purchase APR and the balance transfer APR. The purchase APR is the interest rate relevant to your regular credit card purchases. The purchase APR kicks in when you elect to charge goods or services or create a monetary equivalent of such transaction using the card.

Stated differently, the purchase APR is used to determine the interest charge to you on the debt you carry over from your credit card purchases into the following billing cycle. Every month you get a statement with an interest charge applied to the sum not paid in whole from the previous statement. The purchase APR helps you to ascertain the interest you owe on this rate of purchase.

The credit card issuers also establish the purchase APR, however their rates change based on the applicant's credit check. On a loan, the link between credit score and the interest rate is such that the average percentage rate you may get is lower the better your credit score and creditworthiness. While people with bad credit scores of under 630 may be charged an APR of 25% or more on their purchases, those with high credit ratings of 750 or above may often be issued credit cards with a purchase APR of between 10-15%. Your credit card issuer sets a higher interest rate on your credit card to offset this perceived increased risk connected with you, the cardholder, not repaying your debt, therefore producing a risk-based pricing model.

Why should you try to lower it?

If your credit card balance is the one that you carry forward to the next statement cycle, the purchase APR should be the primary criterion for choosing your card. The variation in interest rates can amount to hundreds of dollars; even if you have a difference of a few percentage points. This is why it is wise to proactively try to maintain your rate at as low a number as possible to avoid having a large sum of money automatically withdrawn from your account to cover your card balance over time.

Fortunately, there are several tried-and-true methods for reducing your purchase APR over the years. You will just begin to get a positive trend even if it’s a one percent improvement will go a long way for you. If you are the kind of person who usually pays an overdue amount, you will be able to save a lot of money if you adopt any of the following methods. Let’s take a look:

Credit Score and Report You

The first thing to do to reduce your purchase APR is to look at the score and the full report to see if there are things that you can do to improve the number. Each of the major credit bureaus provides the ability to review your full credit report at least once per year for free. Go through the account information in each bureau one by one and determine if there are any errors in the data that are pulling down your score. To address or eradicate such problems, one needs to report the concerns to the lender or bureau with relevant documentation. This can give a spike in the score in certain situations.

Also, review your credit report in search of accounts in collections, or high credit card balances that you can manage to pay. Paying off balances or returning accounts to current status will most certainly contribute to the improvement of the score. Every little bit helps.

Improve Your Credit Score

As earlier discussed, your credit score is a critical factor that determines the purchase APRs that you are eligible for from lenders. Hence, one of the most effective methods of lowering the rate is to work harder on the score gradually. Just raising it even a hundred points or more can make you qualify for cards with significantly lower interest rates. In addition to what we discussed regarding checking your report for errors to fix, there are additional measures you can take.

Ensure that all loans and credit card balances are paid on time every month.

Reduce overall credit card balances in full.

It is also recommended to limit the balance on credit cards to no more than 30 percent of the given credit line.

Do not apply for more credit than you require at a certain time

Establish a positive payment history with new services and bills over some time.

Implementing credit best practices such as these will generally lead to a gradual increase in credit scores. It is advised to check your score every few months to ensure that the trends are still moving in the right direction. When you notice your score moving towards a range a hundred points higher or even more, you can easily apply for a new card with a significantly lower interest rate.

Request for a better rate from your existing card issuer

It should be noted that most consumers do not realize that they can just as easily request their current credit card company to lower their purchase interest rate. Banks fight so much for customers that very many of them will be willing to adjust your rate based on request only especially if you have been using their products or services for a long time.

One might consider trying to contact their customer service line after a year or more of being a customer. Gently inform them you wish to reduce your rate as you have a good track record when it comes to their card and you’ve been using the card for a long time. If the first representative is not helpful, please ask the operator to connect you to a manager for further assistance. This is a good way of negotiating and ensuring that you are given a lower continuous rate than what you are currently paying without having to shut down the current credit card and create a new account. It is always a good idea to try.

Relocate to a Balance Transfer Card

A balance transfer credit card enables you to transfer your balance from another credit card and offers a 0 percent introductory APR on the balance for a fixed time. Balance transfers cannot be made on new purchases but provide substantial savings for any transferred balances.

The trick is to look for offers where the promotional rate is 0 percent for a period that will allow you to repay the balance in full before the regular or higher interest starts to apply. For instance, if you have five thousand dollars to pay off, transferring to a card with fifteen months 0 percent will allow you to make ample time frame to pay the remaining balance using the monthly installments. As long as you pay off the amount by the specified date on the card, then you are in for a fantastic offer, especially with no interest charged.

To avoid these issues make sure that no balance transfer fees are included and that these are normally about 3 percent of the overall amount you transfer. It is also important to always make payments on time to not negate any special offer. However, balance transfer cards should be used correctly to avoid high interest and to get rid of all your credit card balances.

The above steps are some of the rudiments millions have employed to achieve lower credit card interest rates. It makes a huge difference to keep checking your credit report and score and to approach lenders asking for lower interest rates. Furthermore, the use of promotional offers in new balance transfer cards helps one to attack and pay off the debt without incurring more interest. Try one or more of these methods the next time you work on lowering your purchase APR. Constant attempts at seeking a lower rate will pay off in the long haul and result in great savings.

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