0% purchase cards are one of the most popular credit card types in the UK because they let you buy things – and then not pay any interest for an introductory period (which can be up to three years!)
How do 0% purchase cards work?
Every UK credit card offers you the ability to buy at 0% because there is always a grace period between when you make purchases and when you need to settle your account.
Although this universally available 0% period is useful, there might be occasions when you can’t or don’t want to pay your account balance in full. The ability to roll your balance over from month to month is one of the main attractions of credit cards, but it does mean your debt can quickly accrue high interest.
For many people, 0% purchase cards are the solution, as they enable you to avoid interest on new purchases for a long period of time – so long as you make your minimum monthly repayments. This means you can more easily roll a balance on to a future date when you’ll have the funds to clear your balance, or simply split the debt over a number of months so it can be tackled in more manageable chunks.
What are the advantages of 0% purchase cards?
The main advantage of purchase cards is the 0% interest they offer on new purchases, but this kind of offer isn’t exclusive to credit cards. Many retailers use 0% finance for their products as a way of tempting you to shop with them. But using in-store credit prevents you from shopping around freely for the best product or deal, and it also usually means that you lose some flexibility on when you can make repayments.
0% purchase credit cards offer the perfect combination of freedom to use the card whenever and wherever you want, and repayment flexibility.
0% purchase cards also benefit from the advantages and perks available with other credit cards. For instance, all UK credit card users benefit from the purchase protection of Section 75, which lets you claim back the cost of faulty products from your credit card issuer. The minimum spend required to trigger Section 75 protection is £100, so it is not normally available for day-to-day spending – but if you’re looking for a 0% purchase card you are probably about to make a larger purchase.
Many 0% purchase cards also offer reward points, where rewards are directly linked to the amount you spend on your card. Spending on a balance transfer card is normally a bad idea – but 0% purchase cards offer a perfect vehicle for spending, and a great way to increase credit card rewards.
Disadvantages of 0% purchase cards
Purchase cards are clearly an attractive proposition, but they have at least one obvious drawback: you can accrue a potentially risky amount of debt. This is true of all credit cards, of course, but because purchase cards offer a long 0% interest period they can lull you into a false sense of security – and before you know it, 36 months have ticked by and you’re paying a high rate of interest on a large amount of debt.
In short, you should only ever spend money on a credit card when you have a planned schedule for repayment. Just a month or two of high-interest repayments will nullify most of the benefits or rewards that you might’ve collected.
If you find yourself in this situation you might be able to shift your debt to a 0% balance transfer card – but just be aware that, a few years from now, there’s no guarantee that 0% balance transfer cards will exist, nor that they will have long promotional periods. Your own financial situation might have changed a few years from now, too!
Can I get a 0% purchase credit card?
Once upon a time 0% purchase cards were the reserve of people with excellent credit scores. Today there are 0% purchase options for almost everyone, even if you have a bad or limited credit history. The best 0% purchase cards, though, with the longest 0% periods and most valuable rewards, still require a good credit rating.
Alternatives to 0% purchase credit cards
The UK credit card market is developed and highly competitive, and there are a number of alternative options available. Whether these are better suited to you will depend on your spending habits and financial situation.
If you already have credit card debt that you are paying double-digit interest on, you will probably save more money with a balance transfer or a balance transfer and purchase card than you would with a dedicated purchase card.
Equally, if you clear your balance every month you might want to consider rewards cards that offer cashback or points. Because of the UK’s high rate of inflation, though, a 0% purchase card will probably serve you better than 1% cashback. Since cashback is usually paid annually, its value to you diminishes by the rate of inflation before you get it. Conversely, if you defer the payment of goods to the end of your 0% period, and a high rate of inflation remains, you would pay considerably less for them in real terms.
0% purchase credit card FAQ
Do I have to pay anything on my purchases within the interest-free period?
Yes. While you are not charged any interest on your purchases for the duration of the interest-free period, the debt still has to be paid back, and you will need to pay at least the minimum payment every month. Failure to do this will result in the 0% purchase offer being rescinded, and you will be left to pay the remainder of your balance at the standard APR. With this in mind, it is best to set up a direct debit from the outset.
Are my purchases protected?
If you use your credit card to make purchases over £100 and under £30,000, your purchases are legally covered under Section 75 of the Consumer Credit Act 1974. This means that the credit card issuer is equally liable (jointly and severally liable) as the supplier of the goods if they turn out to be faulty, or the supplier goes into liquidation. One thing to note here is that credit card purchase protection only applies if there is a direct link between you, the consumer, the credit card and the supplier. If you use a third party for payment (such as PayPal), then the protection does not apply. If you have a legitimate complaint about a product costing less than £100 you bought with your credit card (it isn’t delivered at all, or it is faulty or not as described), or the supplier goes bust, you can apply for a ‘chargeback’ from your credit card issuer. Your issuer will investigate your complaint and could redeem the money back for you.
Can I transfer a balance to my purchase card?
Yes, but always check the terms and conditions of your particular card. Does the card offer a 0% balance transfer duration? Is there a fee involved? Also, it’s worth noting that there’s often only a small window of opportunity to transfer a balance (typically around two to three months) to benefit from the 0% duration period. If you’ve had your purchase card for some time before you transfer your balance, you may end up paying a high fee and paying the balance transfer off at the standard APR rate, which may not make financial sense.
If I take cash out on my purchase card, is this included in my interest-free period?
No. Cash withdrawals are not considered purchases and are chargeable immediately. In addition to this, most credit card issuers impose a cash advance fee (usually around 3%), and the interest payable on cash withdrawals is often much higher than purchases – sometimes as much as 10% higher. For all these reasons, it is never advisable to take out cash on your credit card. If you need cash, perhaps a 0% money transfer card may be more suitable, where money can be transferred from your credit card to your bank account.