While the days are getting shorter, interest-free credit card deals just keep getting longer.
Those 0% purchase cards are gathering like autumn leaves, and if you apply now there’s a good chance you’ll have plastic to flex in time for Christmas.
The Post Office’s Matched Credit Card has thrown down the gauntlet to the competition with its 27 months, while Clydesdale and Yorkshire Bank’s Gold MasterCard is snapping at its heels with a 26-month deal.
Yet before you get all giddy at the prospect of a free loan in excess of two years, these cards need to be treated with respect.
If you don’t know what you’re signing up for, you could come a cropper to one of these caveats…
You might not get what you signed up for
Credit cards print a representative APR in their ads, but the key word here is 'representative'.
They actually only need offer this rate to at least 51% of successful applicants.
This could mean a higher rate of interest when the 0% deal ends, but it might also affect how long it lasts.
Research by Gocompare.com on 20 August, 2015, showed that 44% of 260 credit cards listed by Defaqto varied the interest rate offered depending on the applicant’s credit status.
What’s more, 10% of the cards also varied the terms of their introductory offers, depending on the applicant’s creditworthiness.
That means that you could potentially find yourself accepted for a card, but on a shorter interest-free deal than expected, with a higher follow-on rate.
If you’re accepted, don’t celebrate with a spending spree.
Check your paperwork to see exactly what deal you’ve got.
If it’s shorter than you’d hoped, you’ll have to cut your cloth accordingly by reducing your planned spending or upping your budgeted repayments to make sure you can repay before the end of the 0% deal.
Prevention’s better than cure with credit card applications, as the UK Card Association’s head of policy, Richard Koch, explains: “As the APR a customer is offered can depend on their specific circumstances, it is not always possible to give the exact rate they will be offered before the details of the application are processed.
“However, many credit card providers offer consumers the ability to check their eligibility for a particular card before carrying out a full application.”
That way you won't adversely affect your credit record by making multiple applications in fruitless pursuit of a 0% deal.
You could be caught out by additional charges
Your card might be interest free on purchases, but using it for anything else could prove costly.
Most credit cards, interest free or otherwise, will charge for cash machine withdrawals,or for spending abroad.
Be wary of being lured by 0% purchases cards that also offer interest-ree balance transfers, as you’ll probably have to pay a small percentage in fees for that – on a £2,000 balance with a 3% transfer fee, that’s £40.
Finally, watch out for retailers’ credit card fees – car dealers and travel operators are the big culprits here.
We don’t want to bore you by keeping on banging on about this, but once again, you need to read the small print that comes with your card.
Consider a credit card specifically for foreign use instead of hammering your 0% purchase card. And, if you’re planning to use your 0% card for a new motor, remember to ask about and factor in any fees and read our car finance guide for more on ways to pay.
You might spend more than you mean to
One problem that a lot of people seem to experience with an interest-free card is losing their head and spending more than they had planned.
You might even be offered an unsolicited credit limit increase – before you know it you’re galloping towards the end of your 0% deal with twice the debt you expected and no prospect of repaying it before the higher APR kicks in.
It’s just a matter of discipline. Cards with 0% on purchases are at their best when used for a planned, high-value purchase, paid off with monthly payments that’ll repay the whole debt by the end of the 0% term.
Stick to your plan and if you’re offered a limit increase, just say no. If you can’t trust yourself, once you’ve made your planned purchase take the card out your wallet and put it away somewhere safe.
You’ll be in hot water if you miss a payment
This one’s pretty serious. Miss a payment and you’re in breach of contract, so your card supplier is perfectly entitled to rate-jack you – it can revoke your interest-free privileges, leaving you paying a high APR on the balance you’ve built up.
What’s more, it can charge you a fee for the pleasure, plus you might not find it easy to escape – it’ll be extra hard to get accepted on a balance transfer deal once you’ve blotted your credit record copybook with a missed payment.
Luckily, the solution’s as simple as the consequences are dire – just set up a direct debit payment for at least the minimum payment to make sure you don’t cost yourself a fortune and ravage your credit file in one fell swoop.