Part 1: How Do 0% Purchase Credit Cards Work?
0% purchase credit cards are a great way to spread the cost of a large purchase or a long shopping list.
The idea is simple - you won't be charged any interest on purchases made using the credit card for so long as the offer lasts and then after that set period of time you will have to go back to paying interest on your purchases.
More on how 0% interest rate credit cards work
Like Balance Transfer or Reward credit cards the 0% rate, which usually starts as soon as you take the credit card out, is basically an incentive to get you to switch to a new credit card provider.
Competition is fairly high, with providers battling it out to offer the longest 0% deal but even so the duration of such offers varies greatly - from almost a year to just three months.
When your 0% purchase rate period runs out the outstanding balance on the credit card will begin accruing interest at the standard rate.
The standard interest rate on credit cards with 0% purchases deals can be high - usually around 15.9% p.a. - so, to use them effectively it's important that you clear your balance before the 0% purchase rate offer ends.
It's also very important to remember that even when a credit card has a 0% interest rate it is still necessary to pay at least the minimum repayment amount every month. If you miss a repayment it’s likely that the 0% purchases offer will be withdrawn and you’ll be left paying off your purchases at a high rate of interest.
Ideally, you should pay more than the minimum repayment amount every month in any case to pay your balance off before the offer ends.
For this reason, trying to get the longest possible 0% on purchases rate is usually the best way to compare these credit cards. The exception to this rule are 0% purchases credit cards which also have 0% balance transfer offers, see below for more on this.
Current longest 0% purchases credit card deals
Use our 0% purchase credit cards comparison table to see more deals.
Watch out for...
0% balance transfer and 0% purchase rate credit cards
Credit cards with a 0% balance transfer offer often have a 0% purchase offer thrown in.
If you want to use a credit card for both a 0% balance transfer and no interest on purchases it is important to make sure that the 0% purchases and the 0% balance transfer offers are of the same length.
If the 0% purchase period is shorter than the 0% balance period (on the balance/debt you transferred), then you shouldn't use the card for new purchases. This is because with most credit cards, you have to pay off the debt that is accruing the lowest interest FIRST, before you can pay off the debt that is accruing the higher levels of interest.
So when your 0% purchases offer runs out, you will not be able to pay off this debt, until you have paid off the old debt that you moved onto the 0% purchases/0% balance transfers credit card.
| Best credit card for balance transfers and purchases |
Sainsbury's Bank
0% on purchases for 10 months & 0% on balance transfers for 10 months (3% fee)
Halifax All in One
0% on purchases for 9 months & 0% on balance transfers for 9 months (3% fee) |
| Example of a credit card not suitable for using for both balance transfers and purchases |
Post Office
0% on purchases for 3 months & 0% on balance transfers for 12 months (2.98% fee) |
For more information on this issue, visit our 0% balance transfer and purchase credit card page.
Transactions not included in the 0% purchase offer
A 0% purchase credit card offer will cover anything that you buy with the credit card whether you're paying in a shop or online but there are some notable exclusions.
Using a 0% purchase credit card for any of the following transactions could be particularly expensive whilst the 0% deal is in place.
This is because credit cards have an Allocation of Payments clause which governs the order that your repayments are applied to transactions. Special offers (like an introductory 0% interest rate) are usually paid off first then other purchases, cash transactions and fees.
If you were to use your 0% purchase credit card for purchases and then for one of these higher rate transactions the higher rate would be 'stuck' accruing interest behind the 0% deal and you would lose any benefit that you gained by having a 0% interest rate on purchases in the first place.
- Cash Transactions
Getting money from the ATM with your credit card will be subject to fees and interest from the moment you make the transaction.
Getting 'cash back' at the check-out, buying foreign currency or travellers cheques and making money transfers are all counted as cash transactions.
It's also worth being weary of shopping vouchers - purchasing these is often considered a form of 'cash' transaction and as such won't be included in the 0% rate.
- Gambling Transactions
All gambling transactions including funding accounts to play online Poker or Bingo, buying lottery tickets, placing bets at a bookies and buying chips or credits at casinos count as cash transactions and won’t be included in your 0% rate.
Sometimes even buying food or drinks at a gambling establishment can be construed as a 'cash transaction' and be subject to interest and fees. If you're going to the casino, leave the 0% purchase credit card at home.
- Fees and Charges
Fees and charges your account is subject to won’t be included in your 0% interest rate. These are not considered purchases, and you will pay interest on them.
Handling fees for cash transactions and interest accruing from the same are two examples of these kinds of fees.
 0% purchase credit cards
This best buy guide is updated monthly, which means if any facts, rates or fees change during the course of a month this guide will not reflect those changes until the next scheduled update.
While we will make every effort to ensure and maintain current and accurate information in this guide, readers are always advised to check rates and fees with the credit card provider before signing up.
Date of last check: 3rd March 2010 |
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