Everything you need to know about credit card representative examples, purchase rates and APR

Apr 26, 2020

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If you’ve read any of our TPG reviews of the various credit card products available in the U.K., you may have noticed a reference to terms like representative example and APR. This is something we are legally required to include when talking in detail about financial products.

For example, the British Airways American Express Premium Plus Credit Card, one of our favourite credit cards in the U.K. because of its valuable 2-4-1 Companion Voucher, has the following representative example:

Representative example: This card has an APR of 76.0% variable and a purchase rate of 22.9% variable with an assumed credit limit of £1,200.

Let’s break this down and look at what each part of this representative example means.

Related: The best UK miles and points credit cards of 2020


APR stands for Annual Percentage Rate, which is the total cost of borrowing money over a year on a credit card. This includes the purchase rate (see below) and the fees and charges all customers incur, such as the annual fee. The calculation assumes you use your full credit limit (see below) on day one of the year and then repay it in equal instalments over the course of the year as and when it becomes due.

Note that additional fees like late payment fees or returned payment fees are not included in your APR, as these can be easily avoided. If you incur these, your APR could be even higher.

The reason the APR can be so much higher than the purchase rate — for American Express cards especially — is partly because the annual fees for Amex cards can be substantial.

Related: How credit and credit scores work

Representative Example

Representative means that at least 51% of the approved cardholders of that product will receive that rate or a lower rate. This is done to help customers compare different products on a like-for-like basis. The actual APR you receive may be different based on your creditworthiness, as decided by the card issuer, but the representative example is the most likely rate you will receive.

(Photo by Josh Gribben for The Points Guy)
(Photo by Josh Gribben for The Points Guy)

Purchase rate

This is the interest rate you will be charged on the purchases you make on the card over the course of a year. If you make a purchase and don’t repay that amount for a year, you can expect to be charged 22.9% interest over the course of the following year on that purchase, using the representative example above.

Where the purchase rate is listed as variable, that means the rate could change over the course of that year, and this could make your APR variable as a result, too.

Assumed credit limit

All credit cards have an assumed credit limit of £1,200 in the Representative example to make it easier for you to compare different card products. The actual credit limit you are given if you are approved for a card may be much higher or lower than this. That will be based on the credit provider’s determination of your creditworthiness. The assumed credit limit isn’t the limit most customers receive, or the average credit limit amount — it’s simply to help you compare products.

Related: How to build good credit in the UK

Bottom line

These details, which we include in all of our credit card reviews, should make it easier for you to quickly and easily compare different credit card products. Just remember these amounts and details are for comparison purposes and the rates and amounts applicable to you if you successfully apply for the products may differ.

Featured image by Liam Spencer / The Points Guy

Editorial Disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airlines or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

Disclaimer: The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.