What’s a 0% purchase credit card?
Many credit cards offer 0% on purchases for a set length of time. These can provide a useful way of spreading the cost of larger purchases and they’re one of the cheapest ways to borrow as there’s no interest to pay. At the end of the 0% period, a higher APR will be applied so it’s important to plan ahead and pay off debt as soon as possible.
There are often no fees for taking a 0% purchase credit card, however there are fees on 0% balance transfers, which are frequently offered in conjunction. If taking advantage of both services, it’s necessary to take into consideration when the interest free periods end for each as these can vary. Our full guide here to 0% purchase credit cards explains this in further detail along with information on budgeting, managing repayments and loopholes to look out for.
How to find the best deal
If making large one-off purchases, a 0% purchase credit card with the longest interest free period will help minimise the likelihood of paying interest while spreading debt over time. Any outstanding debt will incur a higher APR at the end of the agreed interest free period so finding the right deal can also depend on whether debt can be paid off within this time. If it’s unlikely debt will be paid off in time, it can be better to opt for a deal with a lower APR or to reconsider whether using a credit card is an appropriate way to borrow.
Some providers offer extra rewards, which can be especially useful for everyday spending, including cashback, points and discounts. Depending on the level of debt remaining, any savings during the 0% period could be outweighed when it ends. So it’s important to be aware of the date the interest free period ends and how much APR will then be incurred.
Different providers offer varying lengths of time during which interest on purchases remains at 0%. These can also vary based on individual circumstances, with shorter 0% interest periods and higher representative APRs possible. Providers require minimum payments and not meeting these can result in losing the 0% interest deal and being switched to a higher APR.
Before making purchases, it’s necessary to be realistic about how much is an affordable amount to pay monthly to ensure minimum repayments are met and debts are paid off in a timely manner. As outstanding debt is moved to a higher APR at the end of the agreed interest-free period, it’s worth calculating how much would need to be repaid each month in order to clear the debt before the 0% deal ends, particularly when making large purchases.
0% on balance transfers
When 0% purchases and 0% balance transfers are taken on the same card, it’s up to the provider to prioritise which debt is repaid first. Often balance transfer debts are prioritised as these tend to have a higher APR. But in many cases, 0% purchase deals will be shorter by a number of months than deals on balance transfers. As a result, interest can start to be applied to purchases sooner than expected even if repayments are maintained.
For this reason, if both a balance transfer and credit card spending is necessary, taking separate credit cards for each can make it more obvious which debt is being cleared when making repayments. Alternatively, it can be worth comparing 0% interest deals where balance transfer and purchase deals lasts for the same duration so it’s clear from the outset when interest will begin accumulating.
Cash advance charges
Like most credit cards, providers charge interest and a fee for cash withdrawals on the vast majority of 0% purchase credit cards. Because of these extra charges, it’s usually best to avoid cash withdrawals and other payments that meet the ‘cash advance’ classification altogether. These can include cash back at tills, foreign currency purchases, paying utility bills, buying gift cards and making mortgage payments.
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