Understanding your energy usage
If you’re looking to make a big purchase, such as a car, a holiday, or if you need to pay for furniture for a new home, you can now borrow cheaply interest-free for up to almost two years with a 0% spending card.
Here’s the lowdown.
This type of plastic offers flexible borrowing. It is designed for shopping, and is a great way to spread the cost of a big purchase.
No interest is charged on new purchases and you can space out your repayments over a long period of time.
Right now, you may be able to borrow at 0% interest for up 22 months with Tesco and up to 21 months with Sainsburys. You can compare deals here.
If you do decide to apply for a purchase card you need to use it wisely.
Most importantly, you must do all you can to clear your card before the 0% period ends, or you will get charged interest. As the annual percentage rate (APR) which kicks in at the end of any promotional offer could be costly, monthly costs could soar. (The APR is the total cost of the loan – including both interest as well as any fees and charges).
You need to be disciplined about paying off your balance by this date to avoid getting caught up in a debt spiral.
When applying for a purchase credit card (as with any piece of plastic), your financial circumstances will be assessed.
The very best deals will be offered to those with the highest credit ratings. If you have a lower score, banks may be cautious about lending to you.
It’s important to note that providers only have to offer their market-leading card deals to at least 51% of applicants. With a poorer score, you may get offered a shorter interest-free period, and a lower credit limit.
Before making an application, it’s worth checking your credit report. You can do this with our Credit Monitor tool.
If you have a low score, it may be worth pausing your applications for a time, and taking steps to boost your score so you can get a longer interest-free period at some point further down the line.
Read more at: ‘How to improve your credit score quickly.’
Don’t apply for lots of different purchase card deals in a short space of time, as each application will leave a ‘mark’ on your credit file, and this could damage your chances of getting the best credit card deals.
Use our eligibility checker to see which cards you are likely to get approved for without doing any harm to your credit score.
Another advantage of using a credit card to make a purchase, such as an item of furniture or a holiday, is that you get protection under Section 75 of the Consumer Credit Act.
This safety net means the card company has equal responsibility with the seller if there’s a problem with the things you’ve bought, or if the firm you’ve bought them from goes bust.
Read more here.
If you want to consider other options alongside purchase credit cards, a personal loan is a more structured way of borrowing a sum of money. You get a set interest rate and an agreed period of time over which that money must be repaid
While rates tend to be lower than on purchase credit cards, you won’t get an interest-free period.
The right answer for you will depend on your individual circumstances. You need to weigh up which product is best for your needs.
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