Using a 0% card for a big purchase.

satkin2

Hi,

This is probably a naive question, but I don't know the answer and I'm sure folks on here do, so here goes.

I'm looking to make big purchase which although I could pay for outright, I'd rather spread the cost on.

I've seen on here that there's a 0% Credit Card for 18 months.

All of the credit cards I've had in the past have been cash back cards where I've paid off the full balance each month. So I don't really understand credit cards once you go into credit.

So, with the above example, does this mean that if I make my purchase on it and make sure I've paid back the balance by the end of the 18 months that I won't be paying any more than the initial purchase price. (I'd plan to split my payments total by 18 and spread the cost that way).

Would this approach have any detrimental effect to my credit rating etc; I don't want to impact it negatively if I can help it.

Thanks

CLAPTON

as long as you pay at least the minimum payment each month and you clear the total debt before the 0% promotion ends, then you pay no interest.

Scarpacci

Provided you pay at least the minimum payment amounts each month, then yes it will not cost you a penny in interest. You have to be careful to make payments on time though, as they will revoke your 0% if you don't. I would set up a direct debit for the minimum amount to be on the safe side.

One thing to watch out for is that 0% deals don't usually end on a statement date, they usually end based on the account's opening date. So you might want to plan to pay it off in seventeen statements to avoid being charged any interest on whatever remains on the eighteenth statement.

It should not affect your credit rating negatively. Some people are concerned about their credit report showing they only pay the minimum, but it's of questionable importance when there's a promotional rate on and it doesn't sound like you would be paying only the minimum anyway.

Gromitt

Don't fall into the common trap of just setting up a SO for 18th of the cost and ignoring your statement. You must make the minimum payment by the due date on the statement every month. After that, you can pay off as much or as little as you like.

Personally, I would just pay off the minimum by DD and put the rest into a savings account (like the PO 3.17%). After 17 months, withdraw the cash and pay off the card. Spend the interest you earned on something nice!

satkin2

Thanks for all of your replies. Looks like what I was thinking was on the right lines.

Useful to know about the timings, 17 months would probably be better if I paid off each month, or the savings account sounds a good idea too.

Your replies have really helped clarify things in my mind so a big thank you to each of you.

thenudeone

0% purchase offers are usually for a limited period (eg: 60 days or 3 months).

You shouldn't use the card for any new purchases after that date. If you do, you will be charged interest on the new purchases in every case, even if those purchases are paid in full and on time.

Purchases (excluding promotional 0% purchases) are only interest free if the full statement balance is paid every month, which you won't be doing..

satkin2

Sorry, I don't quite understand.

Are you saying that any purchases after the first 60 days / 3 months would not be interest free, or that any purchase would be interest free for the first 60 days but there after the remaining balance would acrue interest?

I would be making this one purchase only and would never use the card again. So would this purchase acrue interest if it wasn't paid in full within the purchase time limit?

Kaj

Right i hope this will clear things up for you.

In most cases If the card is interest free on purchases for 18 Months whatever you buy in those 18 months as long as you pay the minimum payment will be interest free (regardless if its in the 1st month or the 16th)

[FONT=&quot]As long as you aren’t reckless with the card it is a very good way to pay for a large purchase (I for example paid for my holiday this year on one rather than eat into saving/ disrupt cashflow) you can just casually pay it off over that period without interest as long at by the 18th month the account balance is cleared.[/FONT]

thenudeone

satkin2 wrote: »

Are you saying that any purchases after the first 60 days / 3 months would not be interest free, or that any purchase would be interest free for the first 60 days but there after the remaining balance would acrue interest?

You'd need to check your own terms. Some cards will say: purchases made in the first 3 months will be interest free for 18 months (or whatever). Sometimes it's 0% on all purchases made in the first 12 or 18 months; and any purchases made in that period will be interest free until 18 months after the account was opened.
I can't tell you what you have been offered - you need to check yourself.

satkin2 wrote: »

I would be making this one purchase only and would never use the card again. So would this purchase acrue interest if it wasn't paid in full within the purchase time limit?

No. The promotional 0% period will always be interest free for the stated period, regardless of whether it's paid off before the end or not. If you don't pay it off, you'll only be charged interest from the date that the 0% period ends, until it's paid off in full.

bigadaj

No. The promotional 0% period will always be interest free for the stated period, regardless of whether it's paid off before the end or not. If you don't pay it off, you'll only be charged interest from the date that the 0% period ends, until it's paid off in full.[/QUOTE]

For clarity this will apply if you rigidly stick to the terms and conditions. If you pay late, go over your credit limit for example you will immediately come off the special deal and onto your standard rate, so you need to be ver careful.