Compare 0% Purchase Credit Cards

Purchase credit cards

Credit cards can offer a quick and convenient way to pay for goods and services. They can be used as a handy alternative to cash or cheques and can also be used to make purchases at a distance, whether online or over the phone. Some cards offer special interest rates on purchases, usually for a set length of time. These are generally referred to as purchase credit cards.

What are purchase credit cards?

Purchase credit cards are technically speaking normal credit cards. They follow the same rules and can be used for all the same things – for accessing credit and making purchases in person, online, over the phone or via mail order. All credit cards can be used to make purchases but when people refer to purchase credit cards they generally mean cards that have a particularly low interest rate on purchases over an extended period of time.

When you take out a credit card you essentially gain access to a pre-agreed credit limit. In essence you borrow money every time you look to make a payment on your credit card. There will be a limit, known as your credit limit, on the amount you are allowed to borrow on your credit card. The majority of cards have interest free periods available on purchases. If you pay the balance in full each month, you will usually pay no interest on the account.

Purchase credit cards have an introductory or promotional rate that lasts a lot longer. This could be 3 months, 6 months, a year or longer. Many purchase credit cards have a purchase interest rate of 0%.

What are the benefits

People who tend to pay off their balance in full each month will not usually pay any interest on their credit cards. Those who usually owe something will have to pay interest on whatever balance remains. With a 0% purchase credit card, they will not have to pay interest on purchases made during the interest-free period.

A purchase credit card can therefore be useful for regular monthly spending where people do not always pay off their balance in full. It could also be used to make a larger purchase up to the value of the card's credit limit. With a 0% card this could effectively mean you are being loaned a substantial sum of money interest-free, as long as you pay the balance in full by the end of the interest-free period. Credit cards are not generally recommended as a source of long-term borrowing, as their overall interest rates are often higher than other types of credit such as personal loans. Used sensibly however, a purchase credit card can be an ideal way to spread the costs of a purchase.

Purchase credit cards can also be more flexible than personal loans. Instead of loaning a fixed amount upfront you are given access to a certain amount of credit that you can use if and when you want to.

Is there a limit to the size of purchase I can make?

As with other credit cards, a purchase credit card will have a credit limit. You can spend as much as you like within this credit limit. If, for example, you have a credit limit of £3,000 you could make a single purchase of £3,000, three purchases of £1,000 each or any other combination that totals £3,000 or less. As you pay off your balance you will free up credit that will once more be available to spend and, as already noted, you are not obliged to use any or all of the credit available to you.

A purchase does not necessarily mean a transaction that is used to buy a physical item or goods. Ifs you pay for a service, buy a ticket for an event or book a holiday, these are all counted as purchases. Other types of spending, such as obtaining a cash advance (where you get money from an ATM with your credit card) or making a balance transfer (where you transfer the money you owe from one credit card to another) are not counted as purchases.

What are the drawbacks?

As with all credit cards, purchase credit cards should always be used responsibly. If you are able to pay off your balance in full by the end of the interest-free period, you will not have to pay any interest on purchases made in that time. After that time any remaining balance will revert to the card's standard rate. It's worth noting that purchase credit cards may have a higher standard interest rate (or APR) than other comparable cards. When you compare purchase credit cards, the length of the interest-free or promotional period and the card's standard interest rate can both be important factors.

A card that has a 0% rate on purchases may have different rates for other types of spending such as cash advances and balance transfers. Making a cash advance on a credit card can be particularly expensive. If you have different parts of your balance that are subject to different rates, the one with the lowest rate is usually paid first. This means that if you make a purchase at 0% then make a cash advance, any payments you make against your balance will be taken from the purchase balance first. Interest will still be paid against the more expensive cash advance balance until it is paid off.

You should also be aware that, even if you do not pay off the balance in full each month, you should still pay the minimum amount due. Failure to do so could trigger a clause that causes the entire balance to revert to the card's standard rate. Many customers find it useful to set up a Direct Debit that covers at least the minimum due each month. This means you should never miss a payment accidentally.