A Guide To 0% Purchase Credit Cards
If you need a loan to make a defined purchased, credit cards are more inexpensive than other types of loans, but only if the card is used correctly. For example, you may need to purchase a new sofa because you moved out on your own for the first time or the old one has to be replaced.
The need to borrow could also stem from the need to pay car insurance for a year to avoid the huge interest rate associated with paying by the month.
For these and other purchases, you can use a pre paid credit card or get 0% purchase credit cards that allow you the benefit of 0 per cent interest free purchases for up to 31 months. However, if you get this wrong, you could end up owing a whole lot of money.
It has been said that debt is like fire, when used well, it is great; when used badly, it can turn into a disaster. As such, before you go ahead and get 0% purchase credit cards, there are a number of things you should be aware of:
To be successful at using this type of loan, you must borrow as little as you need and whenever possible, use your savings instead of borrowing. However, if you are tactically doing it for stoozing and you are financially disciplined, you can borrow higher amounts.
The worst way to use a credit card is using it to fill gaps in your income when ends do not meet each month. This practice could result in constant growth of your loans and could leave you spiraling in debt. If you absolutely need to get a credit card, you should try to lower the costs of your existing debt.
You should resist the urge to use the cards as a supplement for day-to-day spending and you should plan and budget your repayments.
Ensure at Least the Monthly Minimum Repayments are Made
As soon as you are accepted for one of the 0% purchase credit cards, make sure you have a direct debit set up for at least the minimum monthly repayment. Although 0% is being paid, repayments must still be made. If one payment is missed, the 0% deal will be lost. Therefore, the rate will jump and a £12 charge will be added.
Almost clearing your card in full is not good enough; it must be completely cleared to benefit from this deal.
For instance, if you have £2,000 in debt on your credit card and £1,999 has been cleared, the fact that there is a balance outstanding indicates that you will have to pay the monthly interest on the entire amount.
Therefore, if you are able to almost clear your credit card, do all that is possible to completely clear it. This should be done even with 0% purchase credit cards as it is a healthy habit to develop.
Repay the Balance Within the Agreed Upon Period
Even if you go only one month outside the promotional period the interest rate will sky rocket. Therefore, it is important to calculate the amount required for the balance to be cleared within the agreed upon period.
For instance, if you borrow £1200 on a 0% card to be repaid in a year, divide the loan amount by the number of months in the year (£1200/12) to arrive at the £100 monthly repayment and have a direct debit set up to do that.
Although it seems obvious, it should be pointed out that it is tremendously vital to take a note of the end dates of the 0% period. This will ensure the debt is repaid in time or prepare you to make an adjustment for a new Best Balance Transfer contract.
If you fail to switch at the end of the deal, the cost of interest will quickly outweigh the benefit of the card.
Use an Eligibility Calculator
Using an eligibility calculator prior to applying for 0% purchase credit cards will protect your credit score and reveal the cards you will get in all likelihood. Typically, the only method of knowing whether you will be accepted is by applying. However, your credit file is marked by each application.
Using 0% spending eligibility calculator will swiftly reveal your odds of receiving virtually all top 0% purchase credit cards. This will assist you in finding the ones that will most likely to accept your application, thus minimising the number of applications.
Get Your Credit Report
You can take a step further than the eligibility calculator by viewing your credit file. This will provide you with a complete credit health check that includes free Affordability Score, Credit Hit Rate and Credit Report. This type of club is a game changer as it eliminates the mystery in which the credit market has been shrouded for years.
There are some credit cards available which are specifically designed to help you to improve your credit file. Revolutionary tools are used to bring the key components together to provide you with the full picture.
This provides information on boosting your creditworthiness and your chances for acceptance.
By itself, a credit score is not enough to secure a loan because other factors are at play, which is why a number of individuals with perfect scores get rejected. Credit Club provides additional benefits like information on how your credit accounts have been managed and instructions on how your credit profile can be improved.
Watch Out for the ‘Up To’ Catch
It is possible that you might not receive the headline deal for which you applied. This is because some providers give individuals with lesser credit histories fewer months to repay at the 0% than was advertised. For example you could make an application for a 24-month 0% spending contract and your application is accepted but you are only offered a 12-month deal at 0%.
Use the Credit Card Like a Loan By Being Careful
If you exercise caution, your credit card can be used like a loan. Essentially, 0% purchase credit cards can be a cheaper borrowing technique once the card is cleared before the end of the interest-free period.
Some also come with other advantages such as cashback which means you get a percentage back of whatever you spend, a rewards card which will give you rewards from other retailers such as supermarkets, cinema vouchers or air miles and balance transfer credit cards, which will give you an interest free period when transferring the balance from one card to another.
Ensure you only spend the loan amount. To help you with this you should consider ‘hiding’ it in a waterproof bag, putting it in a bowl filled with water and freezing it. This will make it less tempting to use the card again.
The primary distinction between a credit card and a loan is the structured repayments associated with loans. There is a fixed repayment amount each month; therefore the debt is cleared in a set time. To truly imitate the discipline required by a loan, you will have to pay back a fixed amount monthly.
The easiest method of doing this is via a direct debit to ensure the loan is cleared before the card starts to charge interest.
The primary objective is to find the credit card that will provide you with the longest 0% introductory deal and not charge a yearly fee. The ‘go to’ interest rate the card jumps to following the 0% period is listed as well.
However, it is best to pay off these 0% purchase credit cards by the end of the promotional period or transfer the balance of any outstanding debt to another 0% credit card.