Learn to be a Financial Hunter - not the hunted

.Home..|..Banking & Savings..|..Credit Cards..|..Credit File Help..|..ISAs |..Equity Release.|..Mortgages..|..Stockmarket & Investing help

Credit Card Section
FREE Report - How to Audit your Credit File
With errors your rating will suffer
How a clean credit rating can save you money
4 steps to a clean up any mistakes
Don't discount the importance of your credit file
It's absolutely critical.....
More details
You Are Here: Home > Personal Finance > Credit Cards > FAQ > Question and answer
The difference between 0% Balance Transfer

Credit Cards and 0% Purchase ones
Last update : September 2010
Adverts
Want a great Credit Card? Find out why these 4 Cards are probably the best on the market. So much so we use 3 of them ourselves. More information.
A balance transfer card as its name suggests is used for transferring a negative balance from one Credit Card to another.

No interest will be charged on this debt for the term of the deal, usually 6 -15 months. There is a charge for transferring a balance, usually 2.5% - 3%.
The difference between a 0% Balance Transfer Card and a 0% purchase one
So theoretically the deal is not free, nevertheless these cards can save a lot of money if you're looking to pay off built up debt.
A 0% Purchase card works like this
When goods or services are bought you pay no interest on the amount for a set period of time, usually 6-12 months.

So buy a new sofa or pay for a flight costing £400 and no interest is charged for say a 9 month period. But you will still have to pay at least the minimum balance every month, usually 2% - 3%.

However, whereas 0% balance transfer Cards are excellent for people who want to pay off their debts, 0% Purchase Cards in my view are very dangerous because they encourage spending.
0% Purchase Cards can play tricks on our minds

Many people have discovered the problems with 0% Purchase cards having been sucked in by the clever marketing because anytime money is offered interest free it's often seen as a great deal.

True to a certain extent but the real question is this -

Would you have spent using the card if there was no interest free deal?

Chances are no, so the card company has induced spending on your behalf. Of course this doesn't really matter if you repay the debt within the set time period. Sadly, many don't which means they'll start to pay interest and hence the card company has done well.

But 0% Purchase Cards can be an excellent tool to use in the right circumstances. For example -

  • Somebody who moves house can use one (or more) to buy new furnishings and other items related to the property
  • The right goal to aim for would be to stagger the monthly payments over the term making them easier to budget. For example -
  • Spend £3,000 using a 0% Purchase Card
  • Divide the amount by the number of interest free months, in this example 9
  • Then make 9 monthly payments of £333
  • At the end of the term the balance will have been paid in full

See also
    Looking for something? Then search this site:


    © 2010 LearnMoney.co.uk All rights reserved

    The information on the LearnMoney.co.uk website has been compiled from sources believed to be reliable, but is not warranted to be accurate or complete.
    All recommendations and comments are provided for general interest only and should not be construed as advice.
    Professional advice should always be sought before buying or investing in any financial product.
    The price of securities and any income from them can go down as well as up.
    Past performance of a security or market is not necessarily indicative of future trends.
    Any opinions and recommendations on LearnMoney.co.uk are given in good faith, but without legal responsibility and are subject to change without notice    .