0% credit card advice

keldar89

Guys,

I recently passed my car test and now hoping to get a car. Nothing flash - a second hand car, £2k max as a cheap runner to get me from A to B, as well as insurance.

Unfortunately, I do not have the full amount up front in order to get one. However, I am considering getting a credit card with 0% APR for the first 15 months to buy one.

Is there a reason why it is a bad idea do this? I currently am in employment while writing this. I am weighing up the pros and cons.

I am always very cautious about opening up a long-term agreement when it comes to money, since the employment market can be so unpredictable and I always dread the worse in these situations. I have had one phone contract, which ended Oct '13 and one loan which ends Jan '15.

My thoughts on this decision are as follows:

• With my current income, it should be repayable within a year.
• It is not a huge amount. OK, if you do not have the income then yes it is. But if you get a reasonable salary then there is no reason it cannot be paid off fairly promptly (within 12 months say)
• If worse comes to worst, I could resell the asset to keep up a good sized payment per month

My decision for this route is because car finance will come with interest always, so the fact this is 0% APR already pays off. Likewise with insurance. I would prefer the car now to make use of, instead of saving 7 to 8 months and waiting.

Your thoughts will be welcome. As I say, I always fear the worst, but what happens if the worst occurs (such as redundancy) in these situations...?

keldar89

Oh, and I pay rent to my parents...

grumbler

If you can get a card, it's obviously better than car finance even if the garage charges extra for CC payments.

Do you have an idea of how much your insurance can be?

keldar89

I believe my last quote was about £620 - I will put that on card too. Good point. I don't think it will greatly increase my monthly repayments but I will certainly need to include that.

SuperHan

If you are paying monthly for insurance now, you will save money by putting the whole amount on the CC as there will be no interest.

However, a lot of garages are reluctant to take full payment by CC, or will charge a hefty fee for this, so watch out.

keldar89

Thanks Han, how much are we roughly talking? Is this because they have to pay a small sum to the bank?

Are we talking about garages which advertise as "accepting all credit cards" too?

keldar89

OK so I have taken the plunge and decided to make the application. Before I accept the terms and conditions, there's the following statement:

D. Total amount payable
The total amount payable is £1323.00.

The total amount payable is the total amount of credit plus the total charge for credit payable under this agreement.

The total amount payable assumes the total amount of credit is £1200 and, in order to calculate the total charge for credit uses all the other assumptions set out in section C above.

I don't understand - is this an example if I were to spend £1200 of what I'd have to pay? And presumably this is if I was to repay outside the introductory 0% on purchases offer?

Ebe_Scrooge

Yes, most garages will charge for using a credit card ( if they accept one at all ). It's typically 2 - 3 %, but make sure you check carefully beforehand.

You'll need to do the sums - it may well be that accepting the charge still works out cheaper than paying interest on a loan, but you'll need to work out what's the cheapest option for your particular circumstances.

The other thing to watch out for - make absolutely sure that you pay at least the minimum payment on your card every month. Most 0% deals will cease if you miss a payment, and you'll start paying their standard rate. Set up a direct debit to pay the minimum, and in the first month be very very careful to check that the DD has gone through successfully. Make it for a couple of days before the "payment due by" date, so that if it doesn't go though for whatever reason, you have time to make a manual payment.

Fruit_and_Nut_Case

keldar89 wrote: »

OK so I have taken the plunge and decided to make the application. Before I accept the terms and conditions, there's the following statement:



I don't understand - is this an example if I were to spend £1200 of what I'd have to pay? And presumably this is if I was to repay outside the introductory 0% on purchases offer?

Exactly right. This is just a standard example but it often causes a little confusion.

keldar89

Awesome - thank you both! This has been a great help.