(Probably stupid) question about 0% credit cards

sgoode

I am planning to use a 0% credit card to pay some of the balance when buying a car from a dealer.

When looking at the terms of both the Tesco and M&S cards they both say something along the lines of:
Purchases - 0% for 13 months from account opening

but then further down it says
Interest free period - Maximum 51 days for purchases if you pay your balance in full and on time, and have paid the previous month's balance in full and on time.

Am I being really dense, or do those 2 statements contradict each other? Or does the 2nd statement refer to paying off the balance in full each month after the introductory 0% rate ends?

YorkshireBoy

sgoode wrote: »

I am planning to use a 0% credit card to pay some of the balance when buying a car from a dealer.

They'll want to pass on their 2-3% merchant fee. If they don't, you didn't haggle hard enough on the price!

I understand there's a way to buy Sterling travellers cheques with the Tesco card (search this board and the forums at www.stoozing.com) that would incur only a circa 1.25% fee.

...does the 2nd statement refer to paying off the balance in full each month after the introductory 0% rate ends?

Yes.

lisyloo

The second statement refers to after the promotional period.

You still need to make minimum payments on time during the 0% period and a car dealer is likely to want a fee of a few % for using a credit card (still a cheap loan though).

sgoode

Ok, thanks to both. That answers my question.

The haggling hasn't commenced yet - I will do my best to get them to absorb the fee! I just want to get a card set up and ready to use and see what credit limit they give me.

chattychappy

No you're not being dense as this comes up quite often.

The way to think of it is this:

1) If you pay the entire statement balance in full by the due date, then interest won't be applied. Hence the "up to 51 days" thing. An exception to this rule is cash advances and equivalents.

2) If you don't pay the balance in full, then interest will be applied at the prevailing rate.

3) The prevailing rate is usually a standard rate unless a promotion applies. It might be different for cash, BTs, purchases.

4) Promotional rates are typically lower and apply for a period of time on transactions performed during a period of time. Eg 0% for 12 months on BTs taken out within 3 months of account opening.

5) Promotional rates are usually lost if you break the rules - eg forget to pay on time.

So in your case you are seeing 1) and 4) working together. If you pay in full within 51 days, interest isn't applied. If you don't pay in full then interest is applied - but at 0%. So still nothing to pay.

Whilst it might seem pedantic to think that way, it is helpful when trying to work out how other offers work. Eg if you have a 0% BT offer, but standard rates on purchases then you can only make use of the BT deal by not paying in full each month. On that basis you will pay purchase interest - though payments received will be applied to purchases first.