0% purchase credit cards offer a specified period during which you will not be charged any interest on your purchases, provided you meet the minimum payment requirements. This interest-free period usually ranges from a 6-12 months, but can be as long as 24 months.
If you are planning to make significant purchases, this type of card can be particularly advantageous since they allow you to spread the cost of your spending without the added burden of interest charges. However, it's important to plan ahead for how you'll pay off the balance before the interest-free period ends to avoid high standard interest rates.
David Boyd, co-founder of Credit Card Compare, explains, "When used correctly, introductory 0% purchase rates can save money in the short-term on credit card interest for eligible purchases. Weigh up how long the interest-free period lasts, and don't forget to consider what the rate reverts to when the introductory period ends."
How 0% purchase credit cards work
When you use a 0% purchase credit card for your transactions, the card issuer will not charge interest on the purchases you make within the promotional 0% period. During that time, it is essential to make at least the minimum repayment amount each month.
Watch closely and clear the balance before the end of the promotional period to avoid accruing substantial interest charges. After the promotional period expires, any remaining balance will be subject to the card's standard variable interest rate.
What to know before applying for a 0% purchase credit card
- Promotional period length: Consider the duration of the 0% interest period and ensure it aligns with your repayment timeframe.
- Interest rates: Be aware of the standard variable interest rate that applies or reverts back to at the end of the promotional period.
- Minimum repayment: Ensure you meet the minimum repayment requirements every month during this time to avoid penalties.
- Annual fees: Check for any annual fees associated with the credit card.
- Additional perks: Some issuers combine an interest-free period on new spending with rewards like frequent flyer points.
- Eligibility criteria: Specific eligibility requirements apply to cards individually. Check that your income is high enough, that your credit score is good and that there are no recent missed payments or rejections for credit.
How to benefit the most from 0% purchase credit cards
- Set a repayment plan: Plan your repayments in such a way to clear the balance before the end of the promotional period. This helps you avoid high-interest charges.
- Monitor your spending: Keep track of your purchases and payments to stay within your budget and avoid unnecessary expenses.
