Implications of taking out a credit card?

Katie_Bell

Hi, we're thinking of taking out a new credit card as we've been sent a form to apply for a card which offers 0% interest on new purchases for 15 months.

We're about to purchase a conservatory and although we have the cash, we thought we could keep the money in a high interest account and then pay off the credit card after a year.

I don't fully understand this 0% interest thing as I've never kept a balance on a credit card before, we always pay it off. I take it the balance would just sit on the card until we pay it off and it wouldn't accrue any interest? Does this affect our credit rating? Is there some sort of flag which says you haven't paid the balance in full?

Secondly is there an implication for taking out the card? My partner and I both have a credit card each, which is rarely used. I assume there would be an entry on our credit history to say we've taken out the extra one? If so, would it be pointless to take it out if we then didn't use it?

Apologies for all the questions, but I'm rather clueless when it comes to these sort of things.

Thanks in advance for your help

YorkshireBoy

Katie_Bell wrote: »

We're about to purchase a conservatory and although we have the cash, we thought we could keep the money in a high interest account and then pay off the credit card after a year.

First things first...will the supplier take payment by credit card?

If they will, what are the fees? Are they more than the interest being earned in the savings account? If there are no fees, ie they are willing to absorb the 2-3% fees themselves rather than passing them on to you, then I'd be expecting a discount for paying in cash or by debit card (which has a flat, rather than a percentage, fee). That said, and in order to gain section 75 protection, I'd be putting at least the deposit on a credit card.

I take it the balance would just sit on the card until we pay it off and it wouldn't accrue any interest?

Correct, so long as you paid at least the minimum each month it's interest free.

Does this affect our credit rating?

Yes it will, because you have debt! You also have some additional available credit. How much you affect it will be determined by your income and other financial circumstances.

Is there some sort of flag which says you haven't paid the balance in full?

Not as such (although it will be obvious from your credit report that you're carrying a balance...which is on a promotional rate), but there's one that says you've only made the minimum payment.

Secondly is there an implication for taking out the card? My partner and I both have a credit card each, which is rarely used. I assume there would be an entry on our credit history to say we've taken out the extra one? If so, would it be pointless to take it out if we then didn't use it?

Yes.

Katie_Bell

Thanks YorkshireBoy, that's really helpful! I think it sounds like it will be pretty pointless to take it out, but we'll have a discussion.

Thanks for making it so clear