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Primarily it comes down to profit; the potential of profit made by the credit card companies through attracting new customers by offering certain deals and incentives.
In the beginning...
When 0% balance transfers were first introduced they offered 0% interest rates with no transfer fees. As the competition heated up between the credit card companies the 0% balance transfer periods become longer and 0% purchase deals started to be included in the offers.
Shortly after the market flood of rate-tarts jumping between 0% balance transfer deals credit card companies became all too aware of the profits they were losing through 0% balance transfer offers.
The introduction of profit 'claw-back' methods...
Rather than to cease offering these 0% deals and lose the new custom – they started introducing various methods to claw back lost profits – including offers that could actually turn a profit on unsuspecting card users.
Aside from the now well-known 'balance transfer handling fee' – credit card companies also started changing the way 0% balance transfer and 0% purchase deals were used together.
By offering much shorter length 0% purchase periods to the 0% balance transfer period, they were able to lure unsuspecting customers into transferring their balance to the card, and entice them to spend on the new card too.
The allocation of payments...
However, hidden amongst the terms and conditions is a clause of the allocation of payments – the order in which payments you make to your card account will be applied to different balances.
Where these 0% balance transfer and shorter 0% purchase deals are concerned, the allocation of payments often states that payments will go towards the cheapest rate balance first – and only when that is repaid will payments be applied to any higher rate balances. More recently, the allocation of payments clause now often includes a statement that longer period 0% balances will be repaid before shorter length 0% balances.
What this means for the cardholder is that by transferring a balance to the card and then spending on it – the purchases effectively become 'trapped' behind the balance transfer, and when the shorter 0% purchase period ends, the purchase balance begins accruing interest at the standard rate and can then only be repaid by first clearing the balance transfer in full.
The only way a 0% balance transfer and 0% purchase credit card is suitable – and financially safe – to use for both transferring a balance to the 0% rate and making new purchases is if both 0% offers last for the same length of time.
In conclusion...
So the reason there are so few 0% balance transfer and purchase credit cards – is not because there is a lack of these offers, far from it, most 0% balance transfer credit cards now include a 3-month 0% purchase deal.
However, equal length 0% balance transfer and purchase credit card deals – that are suitable to both transfer to and spend on have become the rarity – and the main reason simply comes down to credit card company profiteering.
Getting interest free credit on both balance transfers and purchases
Interest free credit is something that we can all benefit from, and many credit cards offer this facility either on balance transfers or on new purchases.
With 0% balance transfer credit cards you can transfer the balances from other expensive credit cards and then enjoy an interest free period in which to clear the combined balances – although you will usually have to pay a transfer fee based on the amount that you transfer over in total.
With a 0% purchase credit card you can make purchases on your card and enjoy interest free credit for a specified period. Do remember that cash transactions, fees, and charges are not included in the interest free deal.
There are some cards that offer 0% interest on both balance transfers and new purchases. However, more often than not these will be for unequal periods, so the card may offer twelve months interest free credit on balance transfers and three months interest free credit on purchases.
Of course, this may tempt consumers into using the card for both balance transfers and purchases, but when you make repayments on the card your repayment will be applied to the longest 0% balance first, which in this case would be the transferred balance. This means that any purchases that you have made on the card would be left to accrue interest once the 3-month interest free period is over.
Choosing a combined 0% balance transfer and purchase deal...
You can find credit cards that offer equal 0% periods on both balance transfers and purchases. However, there aren’t that many deals like this around – and so you will often find that the 0% periods offered can be shorter.
Choosing separate 0% balance transfer and 0% purchase deals...
You may find that if you want to enjoy interest free credit on both balance transfers and purchases without compromising on the length of the interest free period you will be better off opting for two separate cards – one 0% balance transfer credit card, which you should use only for balance transfers, and one 0% purchase credit card, which you should use only for purchases.
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