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Understanding credit card Annual Percentage Rates (APRs) and payments

Understanding how your payments are applied will help you get the most out of your PenFed credit card.

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How credit card APRs impact your payment

Your payments can be applied differently depending on the amount and types of APRs you have. Knowing how this works can help you save on interest and make smarter payment choices. 

APR Types

Your credit card may have different APRs for purchases, balance transfers, and cash advances. The type of transaction determines which APR applies.

There are generally five types of APRs that may apply on your credit card:

Introductory APR: An introductory APR is a zero or low-interest rate in effect for a predetermined length of time, after you apply and are approved for a credit card. You can learn more about how long your introductory APR period is by reading your monthly statement.

Purchase APR: This type of APR will be applied when you make a purchase on your card and do not pay the full balance before your grace period (this is usually on or before your listed payment due date).

Cash Advance APR: When you make a cash withdrawal from your line of credit, a cash advance APR will be applied, usually immediately. This type of balance usually carries a higher APR than your purchase APR.

Balance Transfer APR: A balance transfer APR will be applied when you transfer a partial or full balance from another card.

Penalty APR: This type of APR typically applied after consecutive late or missed payments or for payments made past their listed due date. In some cases, this higher APR may be applied to current and future balances. Because of the risk of damage to your credit score, in addition to a higher interest rate, it is strongly recommended that you make on-time payments.

Payment FAQs

The Credit CARD Act of 2009 stipulates that any excess payments you make (amounts higher than your minimum payment) should be credited towards the balance with the highest APR. If there is any amount leftover, this will be applied to the balance with the second highest rate of interest. If account balance consists of multiple same-rate APRs the payment will be allocated in direct proportion to the outstanding balances regardless of the payment due date or any promotional APR expiration date. You'll usually make more progress in bringing down your balance faster if you pay more than the minimum balance by your due date, especially if you are being charged interest.

Payments are applied to balances as they appear on your monthly statement before being applied to new transactions. When you make a transaction with your card, you may activate a purchase APR, but there are other types of APR, such as a penalty APR, balance transfer APR (when requesting a balance transfer) or a cash advance APR. Although you may see your overall balance on your monthly statement, you'll also find information about the APRs you currently have on your monthly statement.

A minimum payment is an amount you are required to pay each month by your due date in order to keep your account current. Making the minimum payment by your due date also helps you avoid any added late fees. Your minimum payment is typically between 1-5% of your current outstanding balance, and usually includes any fees and interest you may have accumulated. The specific methods your credit issuer uses to calculate your minimum payment will be outlined in your credit card's user agreement.

 

Disclosures

Please refer to your Cardholder Agreement for exact terms and conditions that govern your account.

Forms, Agreements and Disclosures | PenFed