3.2 What are 0 per cent purchase credit cards?

A.k.a

• 0% purchase credit cards
• Interest free credit cards
• Zero percent credit cards

If you need to make a large purchase but don’t have the funds to pay for it in one lump sum you may well benefit from a 0% purchase credit card.

0% purchase credit cards give the cardholder a set interest-free period on any new purchases made using the card. Currently, you would expect to get a 6 to 10 month interest-free period with 0% purchase credit cards. However, if you get a credit card with a supermarket bank they often offer 12 to 13 months interest free on purchases made in their stores.

Let’s say for example that your fridge/freezer breaks unexpectedly and you don’t have the money to buy a new one. You could go into an electrical superstore, buy a new fridge/freezer on store credit and pay off the balance in equal monthly instalments for a set number of years. If you chose this method you will probably end up paying interest at a rate above 21% per year until you pay the balance off.

However, if you bought it using a 0% purchase credit card, you would benefit from around 6 to 10 months interest-free which would give you more of a chance to clear the balance and therefore avoid paying for the credit service.

When you compare 0% purchase credit cards the obvious thing to look for is the longest interest-free period. It is also worth bearing in mind what the interest rate will revert to once the introductory offer is over. If you are disciplined enough to pay off the balance within the 0% interest period, you needn’t worry about what the interest will revert to once the offer is over. If you think this scenario is unlikely and you think you will be paying off the debt for several months beyond the interest-free period, it may be worth sacrificing an interest-free month for a lower standard APR.

Some cardholders would choose to move their balances to a 0% balance transfer credit card when their interest-free on purchases offer runs out. The cardholder would then have to pay fee equivalent to 2.5-3.0% of the transferred balance to the card company they switch to.

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