What happens when a 0% purchase offer ends?
"I'm confused about the 0% purchases deal on my credit card. If I make a purchase during the interest free period, when will I pay interest on it?
0% purchases promotions are one of the most popular credit card deals, but they can be a bit difficult to get your head around at first.
Basically, during a 0% purchases period, the cardholder can make a purchase and, as long as some basic conditions are met, they won't have to pay it off for however many more months the promotion lasts for.
If the whole balance is paid off during the 0% period, no interest will be charged at all.
However, purchases will start to incur interest at the standard rate if they haven't been paid off before the advertised 0% period ends, or if the credit card terms and conditions are seriously breached.
Let's take a closer look.
Understanding 0% promotional periods
Here are the four most important things to know.
1. 0% on whatever is paid off
In our full guide to 0% purchases deals we list some of the promotional interest free deals available in the UK right now, alongside the length of the deal and the standard APR charged on purchases.
As we noted above, people can borrow with these cards without paying a penny of interest by paying off the whole balance during the months of the interest free period - and that's the best way to use these deals.
In addition, however, credit cardholders won't be charged interest on the full purchase price if they've repaid some of the balance before the end of the 0% offer.
For example, say a cardholder spent £1,000 on their 0% purchase credit card and paid back £500 during the interest period.
When the 0% period ends and the standard interest rate begins interest will be charged on £500, not £1,000.
All in all, the more of the balance can be paid off within the interest free period, the better.
2. Subject to conditions
As we mentioned above, it's important to remember that a 0% period is a promotional offer and the card provider has the right to withdraw it if certain conditions are breached.
If that happened, the cardholder would have their deal cut short and would have to start paying interest on the balance they ran up during the 0% period.
For example, offers can be withdrawn when:
- Cardholders fail to make at least the minimum repayment on their credit card balance at the end of every statement period: more on those rules here.
- Cardholders exceed their credit limit: that is, attempt to spend more than the agreed limit.
Once offers are withdrawn, they're gone - the interest free period won't return the next month - so it's worth making sure to keep to the terms of the offer by, for example, setting up a direct debit to pay at least the minimum repayment amount each month.
3. Only purchases are interest free
We know, the clue's in the name but this could do with repeating: only transactions which count as 'purchases' will be interest free during a 0% period.
For example, cash advance transactions made with the credit card will typically be charged a handling fee of around 3% and the debt will start accruing interest straight away - usually at a higher rate - as cash transactions are not often included in the standard interest free period.
Note that a clause called 'allocation of payments' or 'payment order' comes into play here.
Different types of spending on credit cards accrue interest at different rates.
Credit card providers apply payments made to the account to the balance with the highest interest rate first before repaying other debts.
In terms of 0% promotions, that means that it's possible to clear a balance accruing interest at a high rate and then continue to use the special offer rate without a problem.
4. Not the same as standard interest free periods
Additionally, it's worth noting that promotional interest free periods are a special case.
Standard credit card interest free periods are another matter.
All credit cards have a standard interest free period. It commonly lasts up to 56 days and, in all but a few cases, only applies to purchases made on the card.
In this case, purchases would only be interest free when the previous month's balance has been repaid in full as well as the current month's balance.
This sounds complicated but it needn't be. Let's use the example above in the case of a normal credit card borrowing period.
The cardholder spends £1,000 and then pays back £500 within the interest free period.
They'll pay interest BOTH on the £1,000 (before £500 was paid) AND on £500 from the period the payment was made to the end of the statement date.
See our article here for a longer explanation on a credit card's monthly interest free period.
So when is interest charged?
To summarise, should everything goes ideally, when a 0% purchase cardholder makes a purchase they'll be able to pay it off in full without interest starting to be charged.
Because of the way the deals work, in contrast to standard interest free periods, this should be fairly simple to do.
On the other hand, interest may have to be paid before the 0% offer is scheduled to end if the cardholder breaks the card's terms and conditions or makes a transaction which isn't included in the promotional rate.