Credit cards allow you to borrow money, which you then pay back with interest.
0% purchase credit cards charge no interest on your spending for a set period. This allows you to pay off big purchases in manageable chunks, potentially without having to pay a penny extra.
Market-leading cards right now are offering 0% periods of more than two years. This gives you the opportunity to pay off the debt in 24 or more monthly instalments. If you clear the balance before the end of the interest-free period, you won’t have to pay any interest.
Depending on your credit score, you may or may not qualify for the very longest periods on offer.
What is the catch?
It might seem hard to believe, but there is no catch. These cards are a real help if you have to buy something expensive but essential.
Say that you need a new washing machine or a cooker, but don’t have the money right there and then. With one of these cards, you can cover the cost up front and pay it back over time.
You must obey certain terms and conditions or you might lose your 0% rate.
You also shouldn’t withdraw cash using a credit card as a general rule. This will incur a handling fee of around 3%. The cash you have withdrawn will also have interest charged on it.
Can the deal be taken away?
To keep your 0% rate, you will need to make the minimum payment on time every month. Contact your lender if you are unsure of what your minimum payment amount is.
If you don’t, you’ll be stung with a £12 ‘default charge’ and lose your 0% deal. ‘Default’ in finance means failure to pay on time.
Losing your 0% deal means that you’ll pay interest on any outstanding debt, so this could be a costly error.
The best way to avoid this is to set up a Direct Debit payment from your current account to cover the monthly cost. This automatic system will prevent you from suffering following a memory lapse.
Not an excuse to spend money
These cards should be used for carefully planned purchases only. You need to make sure that you can afford to pay the whole sum back over time.
So you’ll need to figure repayments into your monthly budget. In a best-case scenario, you’ll be able to pay enough to cover the entire debt by the end of the 0% period.
What if I haven’t paid off my entire debt?
If you don’t manage to pay off everything before your 0% period expires, a 0% balance transfer card could be the answer.