Terms and conditions on credit cards can be very confusing. It can also be confusing to determine your interest rate on purchases vs cash advances vs any other promotion on your card.
The purchase rate is the rate of interest you are charged on balances not paid in full on PURCHASES you made with your credit card. It is often lower than the rate of interest charged for cash advances. If you have a 10% interest rate for your purchases on a credit card you only need to pay that interest charge if you do not pay your card in full at the end of your billing cycle.
If you carry a balance of, for example, $1,000 you will be charged $8.33 for that month. The equation to determine that amount is $1,000 x .1 (rate) / 12 (monthly charge). The rate is an Annual Percentage Rate (APR), therefore you divide the interest by 12 to get your monthly charge.
Click for the full glossary of credit card terms.
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