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During periods of 0% interest, a credit card remains to work just like any other except for the fact that interest charges are waived on the specific balance.
When spending on a 0% purchase credit card you will need to pay back at least the minimum required amount each month, if you don't the promotional 0% rate is likely to be withdrawn.
The minimum amount required will be a percentage of the balance outstanding on the card, usually around 2% - 3%. So for every £1,000 outstanding you would need to pay back around £30.
What payments mean during periods of 0%
One of the major benefits of 0% interest is that any payments made to the credit card account will go entirely towards paying back the amount owed.
In other words, if you have a balance of £1,000 and you pay back £30, rather than you balance becoming £990 - because £20 went to pay interest charges; if you’re on a 0% interest rate your balance would become £970.
This means that not only do you avoid paying interest on the amount you owe – but also that you become able to pay back the amount you owe much quicker.
Why you should try and pay back more than the minimum
The main purpose of taking out and using a 0% purchase credit card is not to pay any interest on your borrowing; therefore, you should ensure that your spending is repaid before the 0% period ends and you start getting charged interest on the balance.
To comply with the credit card provider's terms and conditions you have to pay the minimum amount requested on your statement each month, failure to do so will result in default charges and in the case of promotional rates the withdrawal of the 0% offer.
However, you should try and avoid paying just the minimum each month.
People that make only the minimum requested repayment on their credit cards risk being in debt for a very long time, and also risk still having a balance on the card by the time the interest free period expires, which means that they will be charged interest at the standard variable rate on any remaining balance.
By trying to repay more than the minimum amount requested you can increase your chances of getting the balance repaid before interest starts being charged, and you can also enjoy the benefits of paying off your spending debt quicker.
You will also find that only paying the minimum amount can adversely affect your credit rating, particularly in the current financial climate, so you will be doing yourself a favour by ensuring that you pay as much as possible off the balance each month.
Remember to choose the longest 0% period possible
It is a good idea to look around for the best offers on 0% purchase credit cards, and aim for the longest interest free period that you can get, as this will give you even more time to repay the balance before you start getting charged interest.
Currently, the longest deals last for 12 months – so make sure to choose a best buy 0% purchase credit card.
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