How do 0% bank cards work for purchases?

Britons are set to splash out an average of £300 each on Christmas this year, according to research from YouGov.

While many will be using credit cards to help foot the bill, monthly interest charges can add to the overall cost. 

Shoppers using a typical credit card charging 24.9 per cent APR would take over a year to pay off £300, based on a fixed repayment of £20, and it would cost them £55 in interest, data from rates scrutineer Moneyfacts Compare shows. 

That is where zero per cent purchase cards can come in handy – though it is important to understand how they work, and make sure you can pay the money back, first. 

These cards can help spread the cost of big expenses over several months without paying interest, so are a useful way of buying items that you might not be able to, or want to, pay for upfront. Used in the right way, and wisely they can be a cheaper way to borrow.   

We look at how zero per cent purchase cards work, what borrowers need to know, and where to find the best deals.

How do 0% purchase card deals work?

Zero per cent purchase card deals are credit cards which offer a zero-interest promotional period. This gives the borrower a set time in months where they don’t pay any interest on purchases made with them.

They allow you to spend if you have a few big purchases coming up, in effect getting free credit – though it is important to stay within the card’s limits and make any minumum repayments, or else the 0 per cent offer can be taken away. 

Rachel Springall said: ‘A zero per cent purchase deal on a credit card allows shoppers to spread their spend across a few months without the worry of it incurring interest. Some cards have terms as long as 20 months.

Interest kicks in at the end of the deal period, so shoppers should try to pay back the debt within their card’s zero per cent window. 

It is advised to make regular repayments of more than just the minimum amount, to ensure you aren’t left with a debt you can’t pay off at the end.  

Should you always have one in your arsenal?

Zero per cent purchase cards benefit from protection under Section 75 of the Consumer Credit Act. This protects purchases valued between £100 and £30,000. 

Under this act, the credit card provider may be equally liable if something goes wrong with a purchase, or the item isn’t up to scratch, and could refund you directly.

Springall said: ‘If someone typically buys expensive goods this time of year, then it’s wise to get a zero per cent purchase offer in readiness. 

‘Credit cards also protect consumers from fraud, and if any goods or services are not provided. 

Andrew Hagger, director of personal finance website MoneyComms said: ‘It makes sense to use a zero per cent card to fund forthcoming major purchases as that way you’ll still continue to earn interest on your savings balance.

‘Once you start using the card just make sure you make at least the minimum monthly payment on time – if you miss a payment you could see your zero per cent promotional rate terminated immediately.

‘Try to clear the balance by the end of the zero per cent introductory term – that way you won’t pay a single penny of interest on the amount borrowed on your credit card.’

Do you have to repeatedly take out new cards?

Credit card providers use zero per cent interest deals as a way to entice in new customers. 

When the interest-free period is up, existing customers will usually have to open a separate card to benefit from the offer again. 

Springall said: ‘From time to time a provider can offer an existing customer a 0 per cent balance transfer offer, but they may not be as attractive as deals advertised for new customers.’

Could they help in the run-up to expensive periods?

Customers caught in the spur of the moment with sales may just wish to use their existing credit or debit card for ease, but if they are not able to pay off the debt quickly then they could be wasting their money on interest charges.

Springall said: ‘If shoppers get into the habit, they could look at opening a zero per cent purchase credit card a couple of weeks before they expect to do their festive shopping, just in time to get the card in the post.

‘Zero per cent offers give shoppers some much needed breathing space for a few months to spread their payments.’

Martyn James, a consumer champion said: ‘They could help in the run-up to expensive periods but you have to keep on top of your spending. 

‘Work out exactly how much you can pay each month. Don’t put off paying the balance – pay as much as you can. Because the interest free period will end and the rates can be much higher.’

Best zero per cent purchase credit cards 

The longest zero per cent purchase deal at the moment is 22 months, with Barclaycard’s Platinum All Rounder Visa. A handful of different providers offer 20 month interest free periods.

Lloyds Bank, NatWest, RBS, HSBC and M&S Bank are all offering credit cards with a 20 month zero per cent interest period. 

Some zero per cent purchase deals will also allow you to earn points or cashback at the same time as spreading the cost of borrowing interest free. 

M&S Bank’s Purchase Plus credit card is currently offering the longest interest-free period whilst also allowing you to collect points to save money down the line.

Its zero per cent offer on purchases is for 20 months and cardholders get 1 point per pound spent in-store, or 3 points per pound spent if you’re an M&S Club Rewards member.

The only card to offer a longer zero per cent purchase offer is Tesco Bank with its Clubcard Plus Credit Card. This gives you 24 months interest-free on purchases whilst also gathering 1.25 points for every pound spent in store.

However, this offer is only open to Clubcard Plus members at a cost of £7.99 a month. If you are already a member, then this card is worth considering.

Santander’s ‘All in One’ credit card has a 15-month interest free purchase offer and up to 0.5 per cent cashback on spending. However, it comes with a £3 monthly fee.

HSBC’s card, which has 20 months interest-free, is offering £25 cashback when you spend or transfer a balance over £100 by 16 December.