0% credit cards - Free Lunch ?

travelling_techie

Amongst the many things I have learnt in my life, two of the most important ones are "There's no such thing as a free lunch", and "If it seems too good to be true, it probably is!!".

I have seen via this site, two credit cards that offer interest free period on purchases. (Most are only doing such offers on transfers).

Is it really just as simple as getting one of these cards, having a spending spree; and then gradually paying it back over xx months?

I take it you have to at least pay the "minumum" amount every month; and ideally pay 1/xx of the amount, so if its a 12 month period, pay 1/12 !

There must be a catch somewhere - or is it really a case that they hope you get carried away, spend too much, and/or forget to clear it in time ?

Cheers
TT

Daedalus

travelling_techie wrote: »

Amongst the many things I have learnt in my life, two of the most important ones are "There's no such thing as a free lunch", and "If it seems too good to be true, it probably is!!".

I have seen via this site, two credit cards that offer interest free period on purchases. (Most are only doing such offers on transfers).

Is it really just as simple as getting one of these cards, having a spending spree; and then gradually paying it back over xx months?

I take it you have to at least pay the "minumum" amount every month; and ideally pay 1/xx of the amount, so if its a 12 month period, pay 1/12 !

There must be a catch somewhere - or is it really a case that they hope you get carried away, spend too much, and/or forget to clear it in time ?

Cheers
TT

They are wanting your custom and hoping you will stick around/ can't afford to pay the balance off at the end of the term. considering these have been around for years one would assume they are profitable.

Daddy-Spendless

somewhere along the line banks will have some rock solid data to show that overall 0% deals are profitable for them,

im sure there will be lots of people who break their T&C's and loose the 0% deal, loads who don't pay it all back in time, and loads who keep on using the card after the 0% has expired.

a free lunch is available but circumstances will dictate not for everyone.

zerog

The card provider earns around 1.5% of the transaction value on all your spending.

travelling_techie

Daddy-Spendless wrote: »

.... im sure there will be lots of people who break their T&C's and loose the 0% deal, ....

Thanks, that's a good point, will carefully check what the conditions actually are.

TT

travelling_techie

Sorry its me again! I am rather cynical as you may have gathered. I have just signed up for a tesco clubcard zero% for 16 month jobbie, and just need to double-check what happens during the 16 months.

The credit agreement states:

Your minimum payment will be the greater of:
• the total of all interest and default fees charged on your statement plus 1% of the new balance shown on
your statement (excluding 'Tesco Buy Now Pay Later' special offers) plus any arrears carried over from your
previous statement; or
• £25 plus any existing arrears carried over from your previous statement; or
• the amount you owe over your credit limit which includes any over limit fees.

So month 1, fine, just pay the minimum 1%, but then, in month 2, is the remaining balance considered "arrears from the previous statement" ? If so the remainder of month 1 purchase has to be paid off, so its only 2 months of interest free!! Or can you just keep paying the bare minimum for 15 months, and settle in full after then?

Cheers
TT

opinions4u

Arrears means "unpaid" such as missing a payment or underpaying a minimum payment.

I'd suggest paying more than the minimum though. Even if it's only by £1. The CRAs report it as paying more than minimum.

Tixy

No that would be balance from the previous statement.
Arreards from the previous statement would be if you paid nothing (or less than the minimum) the previous month.

You can just keep paying the minimum - though some advise a few £ more.
- Don't get too close to the limit so you might go over.
- Don't leave it to the very last moment to pay, pay a week before its due (or set up a dd for the minimum payment).
- If you set up a dd - double check its set up in time for the first month - it often won't be and then you need to remember a manual payment.

mlp

The monthly statement will tell you what the minimum repayment is - as suggested, pay that plus a little. Personally, I pay £100/month so that it picks away at the capital too.

And yes, it is a free lunch as long as you remain well mannered - I've got 3 such free lunches on the go at the moment

travelling_techie

Splendid - thanks for the quick and helpful responses folks!

TT

mlp

One other tip - most of the 0% purchase cards I've had don't make a song and dance about exactly when the 0% period comes to an end. For example, the RBS card I've just received says "until September 2013" - and they certainly don't shout about it on your statement in the month prior to the deal ending. So, either phone them and ask for a specific date, or ensure it's paid off by end of month prior..