0% Interest Credit Cards

[aaron_2000]

I've always had a thing for finance, I did economics at school, been looking at 0% cards, not something I need, more just something that interests me to find out about. I was wondering how they work? How does 0% benefit a bank?

[bitchstewie]

I'd always assumed it's as simple as a lot of people don't pay it off and don't shop around so 0% soon becomes whatever the rate is after the introductory period.

[Hilts]

That's right. 0% is a good deal until you run up a 10K debt then you're in hock at circa 20% APR when the promotional rate expires.

[aaron_2000]

What about on the lower end of the scale? Say 1200 borrowed and paid back on time? Is it then a case of the bank struck out?

[GregK2]

I'm the sure they still view the data gathered from purchases of value.

Think they also may get a a cut of the purchase price from the merchants? Plus selling your details on..

Edited by GregK2 on Monday 19th March 16:53

[Hilts]

aaron_2000 said:

What about on the lower end of the scale? Say 1200 borrowed and paid back on time? Is it then a case of the bank struck out?

Yes. That's not usually the way it works though with most people and the banks know it.

As Bo Diddley says in Trading Places...'burnt my fingers man'.

Be careful.

[aaron_2000]

Not looking to get one myself, very rare that I don't use cash. Just interested in learning more about how they work.

[oyster]

Don't forget the balance transfer free. Usually around 3%.

It's far from 0%.

[poo at Paul's]

bhstewie said:

I'd always assumed it's as simple as a lot of people don't pay it off and don't shop around so 0% soon becomes whatever the rate is after the introductory period.

Yes, plus for things like balance transfers they charges 3-5% or so.

[Hilts]

aaron_2000 said:

Not looking to get one myself, very rare that I don't use cash. Just interested in learning more about how they work.

Handy things to have. £100+ purchases come with payment protection unlike a debit card.

Balance transfer fees are only payable when transferring money between cards. If you only have one card then there is never a transfer fee.

Have a look on websites like moneysavingsupermarketexpert.

[bitchstewie]

aaron_2000 said:

Not looking to get one myself, very rare that I don't use cash. Just interested in learning more about how they work.

I'd liken it to when I go to the supermarket and pile my trolley full of Pringles (or whatever) because they're 1/2 price.

If all anyone bought was Pringles they wouldn't do the offer but most people will go in and buy something else.

I suspect you're overthinking it.

[theboss]

There isn't really a catch - some banks are offering quite long transfer deals with low fees. I've just been given 32 months with a 0.5% fee. You just have to understand the pitfalls and be disciplined with respect to clearing the balance by the end of the deal. They must be profitable for the banks on the basis that for every customer who pays the balance off in full just before the deal expires, 'X' other customers will end up paying interest at the going rate and it quite easy for some to become 'stuck' in this position with no means to clear the balance quickly.

Also be mindful that it's usually in the smallprint that the promotional interest rate ceases if the terms of the agreement are broken - so if you make a late payment, for example, you could find yourself being put back on the standard rate.

[Stedman]

oyster said:

Don't forget the balance transfer free. Usually around 3%.

It's far from 0%.

1.5% or even 0.59% isn't 'far' from 0% though, to be fair. Currently available from Sainsbury's.

[aaron_2000]

So say I use on to buy a £1500 car and the repayment is say 12 months, is it then possible to pay the balance in say 3 months? Essentially as a kind of pay day loan without the laughable interest and loan shark-esque practices?

[rossub]

aaron_2000 said:

So say I use on to buy a £1500 car and the repayment is say 12 months, is it then possible to pay the balance in say 3 months? Essentially as a kind of pay day loan without the laughable interest and loan shark-esque practices?

Of course.

It’s how I always buy my daily drivers these days. Latest one was £3,200 borrowed - no transfer fee and 0% over 25 months. So a cost free 2 year loan!

I bought a nice private plate the same way - £3,500 paid over 18 months and only something like a £90 balance transfer fee at the time.

The banks must really hate me, as I then cancel the card until I’m ready to start over again. Costs them money to have me as a customer every time

IF and only IF you’re smart and very disciplined, fill your boots while the offers are so good.

[curlie467]

Payments aren't over 12 months, that would be the length of the deal so if you pay it off anytime within the 12 months then the 0% stays.

[aaron_2000]

That could be something to look into then for when I look to buy an Impreza around April-May time. Paying it back won't be anything close to an issue, it would be a month or two to save the money to buy it. I assume it's just the cost spread over x amount of months as opposed to car finance where it's 3x35 for example?

[rossub]

curlie467 said:

Payments aren't over 12 months, that would be the length of the deal so if you pay it off anytime within the 12 months then the 0% stays.

Yeah should have said - there’s no fixed monthly repayment. It’s only the minimum monthly payment with credit cards you have to make - 1% of the balance usually. That’s why you have to be smart and budget to pay it back within the interest free period.

[Jimmy Recard]

aaron_2000 said:

That could be something to look into then for when I look to buy an Impreza around April-May time. Paying it back won't be anything close to an issue, it would be a month or two to save the money to buy it. I assume it's just the cost spread over x amount of months as opposed to car finance where it's 3x35 for example?

If you want to pay no interest, just make sure the total is paid before the interest-free period is up. And that you don't miss a minimum payment as that will cause you problems.

If you can use them like that, they're a pretty great tool

[anonymous-user]

aaron_2000 said:

So say I use on to buy a £1500 car and the repayment is say 12 months, is it then possible to pay the balance in say 3 months? Essentially as a kind of pay day loan without the laughable interest and loan shark-esque practices?

Done exactly this to buy my Cupra R (hello again aaron!!!)

The car was £3500

I had a interest free card with 12 months left on it.

£300 for 12 months pays the car off without paying a single penny MORE than what I borrowed back!!

Easy!

Although, I only did this whilst waiting for the money for a sold car to get to me, so now it's a non existant payment.