Purchase APR on Credit Card Monthly Payment Calculator
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Reviewed by Calculator Editorial Team
When you make a purchase with a credit card, the issuer charges you interest based on the Purchase APR (Annual Percentage Rate). This calculator helps you determine your monthly payment and total interest charges based on the purchase amount, APR, and payment term.
What is Purchase APR?
Purchase APR is the annual interest rate charged by your credit card issuer on purchases made with your card. It's different from the cash advance APR, which applies to withdrawals from your credit card. The Purchase APR is typically lower than the cash advance APR because purchases are considered lower risk for the issuer.
The Purchase APR is expressed as an annual rate, but you'll pay interest on a daily basis. The issuer calculates the daily interest charge by dividing the Purchase APR by 365 or 366 (for leap years), then multiplying by the daily balance. This daily interest is added to your balance, and you'll pay it off over time with your monthly payments.
How to Calculate Purchase APR
The calculation involves several steps to determine your monthly payment and total interest charges. Here's how it works:
- Calculate the daily interest rate by dividing the Purchase APR by 365 or 366.
- Determine the average daily balance for each billing cycle.
- Calculate the daily interest charge for each billing cycle.
- Sum the daily interest charges to get the total interest for the payment term.
- Add the total interest to the purchase amount to get the total amount to be paid.
- Divide the total amount to be paid by the number of payments to get the monthly payment.
Formula
Monthly Payment = (Purchase Amount + (Purchase Amount × Daily Interest Rate × Number of Days)) / Number of Payments
Where Daily Interest Rate = Purchase APR / 365
This calculation assumes you make the minimum payment each month, which is typically 2% of the balance. If you make larger payments, your total interest charges will be lower.
Example Calculation
Let's say you make a $1,000 purchase with a credit card that has a 15.99% Purchase APR. You plan to pay it off in 6 months (180 days). Here's how the calculation works:
| Step | Calculation | Result |
|---|---|---|
| Daily Interest Rate | 15.99% ÷ 365 | 0.04375% or 0.0004375 |
| Daily Interest Charge | $1,000 × 0.0004375 × 180 | $78.75 |
| Total Amount to Pay | $1,000 + $78.75 | $1,078.75 |
| Monthly Payment | $1,078.75 ÷ 6 | $179.79 |
In this example, you would pay a total of $1,078.75 over 6 months, with monthly payments of $179.79. The total interest charged would be $78.75.
How to Use This Calculator
Using this calculator is simple. Just enter the following information:
- The purchase amount (the amount you're buying with your credit card)
- The Purchase APR (the annual percentage rate for purchases)
- The payment term (how many months you plan to pay off the purchase)
Click the "Calculate" button, and the calculator will show you your monthly payment and total interest charges. You can also see a chart that breaks down the interest charges over time.
This calculator assumes you make the minimum payment each month. If you make larger payments, your total interest charges will be lower.
FAQ
- What is the difference between Purchase APR and cash advance APR?
- Purchase APR applies to purchases made with your credit card, while cash advance APR applies to withdrawals from your credit card. Purchase APR is typically lower because purchases are considered lower risk for the issuer.
- How is the daily interest charge calculated?
- The daily interest charge is calculated by multiplying the average daily balance by the daily interest rate (Purchase APR divided by 365 or 366). This daily interest is added to your balance each day.
- What happens if I pay off the purchase before the end of the payment term?
- If you pay off the purchase before the end of the payment term, you'll only pay interest on the days you had a balance. The calculator assumes you pay off the purchase at the end of the payment term.
- Can I use this calculator for balance transfers?
- No, this calculator is specifically for purchases made with your credit card. For balance transfers, you should use a different calculator that accounts for the balance transfer fee and the promotional APR period.
- Is the Purchase APR the same as the variable APR?
- Yes, the Purchase APR is the same as the variable APR. It's the rate that changes based on market conditions. Some credit cards offer a 0% introductory APR period for purchases, but after that period, the rate reverts to the variable APR.