Everything you need to know about 0% purchase credit cards
If used with care, a 0% on purchases credit card can be a useful way to buy bigger items and pay for them at a later date. Find out how this type of credit card works, and how you can avoid racking up a debt that you’ll find hard to pay back.
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What is a 0% purchase credit card?
A 0% purchase credit card lets you buy items upfront and pay off the amount you’ve spent over a set period of time without any interest. If your debt is clear at the end of the pre-agreed 0% period, then you’ll pay no interest and the credit won’t have cost you anything.
How do 0% purchase credit cards work?
Interest-free credit cards let you spread the cost of an item you’ve bought across several months, interest free. You may want to pay off the entire debt before the agreed interest-free period finishes, otherwise you could be transferred to a higher interest rate.
Interest-free credit cards are different to many other cards, as you’re not charged interest when using them during the interest-free period. But the 0% interest period only lasts for a fixed amount of time, as outlined in your credit agreement.
What should I use a 0% credit card for?
It’s usually best to use your 0% credit card for more expensive planned purchases. This is because you won’t need to fund the purchase yourself up front, and can spread the cost over a set period, without being charged interest. Just make sure that you can afford to keep up with the minimum monthly repayments, and ideally repay the full amount before your 0% period ends. Otherwise, you’ll start receiving interest charges, which may make that expensive purchase even more costly.
If we look at an example of how interest charges work, we can quickly see the benefits of a 0% purchase credit card:
If we have a regular card which charged an interest rate of 17% on a £1,000 purchase, the total amount paid for the product would be the £1,000, plus £170 in interest for a total of £1,170. If you’d bought that same item on a 0% purchase card, you’d save yourself that £170 and simply spread that £1,000 bill over the course of a year.
It can also be a good idea to use your credit card for larger expenses, as you may receive credit card protection under the Consumer Credit Act. If you were to pay for a holiday with your credit card, and the tour operator were to go bust, you may able to get your holiday refunded by your credit card provider. While they will always advise you to first try getting a refund through the service provider, the Consumer Credit Act can act as another opportunity to get your money back.
You should avoid using your credit card for cash withdrawals, as these remain separate to purchases, and won’t be eligible for the 0% rate. You’ll instead be charged a daily interest fee, along with an additional withdrawal charge that’s usually a percentage of the amount withdrawn.
What are the advantages of interest free credit cards?
A card offering 0% on purchases can help you buy expensive items as you can spread the cost over a number of months or years without paying any interest. Once any ‘interest free’ period ends – typically a year or two, but this varies and could be longer – you’ll start to be charged interest on any outstanding balance. However – and very importantly – you’ll only be able to benefit from not paying interest if you meet your minimum payment each month and pay back the outstanding amount before the 0% deal expires.
- You buy something for £1,200 using your credit card
- Your credit card offers 0% on purchases for 12 months
- This spreads the cost of £1,200 over 12 months
- 1,200 divided by 12 is 100
- Your monthly repayments for 12 months would be £100
Another advantage is that buying items using a 0% purchase credit card could give you Section 75 protection for payments between £100 and £30,000.
What are some of the disadvantages of a 0% purchase card?
As with all types of credit cards, people can (and regularly do) get into significant debt problems if they misuse them, so you have to use your 0% purchase card with care. Here are some things to watch out for with a 0% purchase credit card:
- The 0% period expires – this is just an introductory period to attract new customers. Once this period ends, you’ll be charged the standard interest rate, which is obviously more expensive. Be sure to make a note of when your introductory rate ends, to avoid a nasty (and expensive) surprise later. This may be sooner than the advertised end date, depending on your credit history.
- Your card will have a credit limit – keep track of your credit card spending to avoid reaching your limit. If you exceed your limit, there will likely be charges to pay.
- You can lose your 0% benefit – if you can’t keep up with your minimum monthly repayments, or exceed the credit limit on your card, you’ll risk losing the benefit of the 0% rate, and instead be put on the standard rate, which is more expensive.
Can 0% purchase cards be used for balance transfers?
With most 0% purchase cards, you won’t be able to balance transfer. However, you may find a small number who do, although there are usually strings attached, such as interest payments and balance transfer fees being introduced.
If you’re looking for a balance transfer, it’s usually best to look for a dedicated balance transfer card instead. These are available with 0% interest and can help you consolidate debt and reduce the interest you need to pay on outstanding debts, making it easier to pay off your balance.
If you’re looking for something that will do both, there are some credit cards that offer 0% on both purchases and balance transfers.
How to choose the best interest-free credit card for you
The best interest-free credit card for you will depend on your personal circumstances. Look closely at the interest-free period – it makes sense to repay the balance in full before the interest-free period ends. That’s because once it finishes, you may be switched onto a higher rate of interest. When comparing 0% purchase credit cards, looking for the longest 0% period is a good place to start. Just remember that there may be a difference between the advertised period, and the one you receive. This can be the result of a bad credit score.
You should also understand the revert rate. The revert rate is the term used for when your 0% period ends, with your card then reverting to the provider’s standard purchase rate. This is obviously more expensive than nothing, so make sure you’re aware how big the jump will be.
Consider the minimum monthly payments. These will vary depending on your agreement and how much you’ve spent on your card. Make sure that you’re comfortable meeting at least these minimum payments, before taking out the card and spending with it.
Look out for an annual fee. Some credit cards come without an annual fee, but others do, and you should check to find out how much you’ll be charged each year for the card. If you don’t think you’ll use the credit card regularly enough, a high annual fee may put you off. Be sure to check these when comparing 0% purchase credit cards.
Check the terms of your credit deal. You can compare credit card deals with us. After you select the best credit card deal for you from our results page, you’ll be sent to the card provider’s site where you can fill in their online application form. Normally, it’ll require a few simple details from you, including your full name, job and income details. Typically, the form can be completed in a matter of minutes.
Frequently asked questions
Can I get a 0% interest card if I have bad credit?
Don’t just assume you won’t be eligible for a 0% purchase credit card if you have a bad credit score. While you may not have as many options as those with a better score, there are still providers who may offer you one. Just keep in mind that you may not receive the advertised 0% period length, and your credit limit may also vary. Keep these things in mind, and be sure to check for any other limits, restrictions or fees when comparing 0% credit cards.
Can you get cashback with 0% cards?
Some 0% cards may reward you with cashback schemes, but for the best cashback earning potential, you may be better off with a dedicated cashback credit card. These will offer you a specific percentage of cashback on a wide variety of purchases. Cashback credit cards reward you for spending more, so be careful to avoid building up debt.
What other 0% cards should I think about?
There are cards that offer 0% balance transfer, where you can move the debt from your current card to a new one without having to pay interest on the balance you’re transferring. However, you’re likely to have to pay a fee to move the balance, typically up to 3% of the amount borrowed.
You could also look at 0% balance transfer and purchase cards, which will allow you to move a balance interest-free and get 0% interest on your spending. You need to check the details carefully so that you know exactly how long the offers last for, and there may be other terms and conditions. Find out more about 0% balance transfer and purchase cards.
Don’t forget that applying for balance transfer cards to move debt (just as with any other credit card) will leave a record on your credit history, which could make it harder to take out other types of credit in the short term.
What else should I consider when comparing 0% credit cards?
When comparing 0% purchase credit cards, it’s useful to take note of the APR for each card. The APR, or Annual Percentage Rate, is the way lenders describe the cost of borrowing money over a year. Understanding the APR can help you understand how much it could cost you to use the card, and it’s just one way to compare how much it will cost you to use a credit card.
Let’s say the APR on a card is 17% and you spend £1,000 on it, the interest and charges will mean that you’re accruing £170 on top of your £1,000 debt. In the end, you’ll be paying back £1,170.
How do I apply for an interest free credit card?
To apply for an interest-free credit card, usually you'll need to have a regular income, preferably £20,000 or above. Supplying bank statements and pay slips can prove this. Usually, you’ll need a good credit history and the credit card provider will study your credit record using a credit reference agency. When you apply for a card, you’ll need to confirm your identification and address. Typically, this can be done by supplying passport and driver’s licence details, and documents like utility bills, tenancy agreements or your HMRC tax notification.
Who can get an interest free credit card?
You must be at least 18 years of age to apply for a credit card. Usually, you need to be a UK resident with a UK bank account and a steady income. Typically, you can’t apply for a card if you’ve already had an application for one rejected in the past 30 days.
What are 0% credit cards with high limits?
Interest free credit cards with high limits let you spend more on your card – typically £1,200 or more.
To be eligible for this type of card, usually you’ll need:
- an annual salary of £20,000 or more
- very good credit history
- a low level of debt
What happens if I miss a repayment?
You’re likely to be charged a late payment fee if you miss one or more of your monthly minimum repayments. And if you fail to pay back the full balance within the interest-free period, you’ll probably have to pay the money back at a high rate of interest. You should call your credit card provider immediately if you’re struggling to make repayments.
Remember, always use your card wisely and don’t spend more than you can afford.
Which credit interest free card is right for me?
When used sensibly, a 0% purchase credit card can be a great way to spread the cost of larger items over a number of months. At Compare the Market, we can help you find the credit card that works for you.