Many credit card companies offer new cardholders a 0 per cent interest rate on purchases for a defined period.
Being able to take advantage of spending with no interest is an attractive incentive for many new customers.
What is a credit card with 0% on new purchases?
A 0 per cent purchase credit card typically charges zero interest on purchases during an introductory promotional period.
The length of the 0 per cent interest period varies, but usually ranges between three and 12 months depending on the provider and card.
With these types of cards, all eligible transactions made during the promotional period do not accrue any interest. Any remaining amount that hasn't been paid off by the end of the promotional offer will start to collect interest.
It’s also important to note that not all transactions on this type of credit card will be eligible for 0 per cent percent interest. For example, your provider might stipulate that cash advances are not included. In this case, any cash transactions made during the promotional period would be subject to the standard interest rate.
If you're considering a 0 per cent purchase credit card, don’t forget that the interest-free period is temporary. Paying off your balance before the end of the promotional period means you don’t pay any interest.
Pros and cons of 0% purchase credit cards
When weighing up whether or not to choose a 0 per cent purchase credit card, consider some of the pros and cons:
- No interest for a set period – The most obvious benefit is that you have the opportunity to make purchases during the introductory period without incurring any interest, provided you pay back the balance before the period ends.
- Good for large purchases – If you want to make a sizeable purchase but need some time to pay it off, a 0 per cent purchase credit card can help by allowing you to space out repayments.
- Useful for balance transfers – Certain providers offer 0 per cent interest on balance transfers for a defined period, giving you a window of time when interest won’t accrue on your balance.
- Benefits are temporary – The 0 per cent interest only lasts for the duration of the introductory period. Once it ends, the card will revert to the standard interest rate, which could be high.
- Balance transfer fees may apply – Even if your provider offers 0 per cent interest on balance transfers, they may still charge you a balance transfer fee.
- Limitations apply – Not all transactions are eligible for 0 per cent interest, and you could be penalised for late payments.
Types of 0% purchase credit cards
Most 0 per cent purchase credit cards fall into one of the following categories:
- Standard 0 per cent purchases – This includes a 0 per cent interest rate on purchases over an introductory period. The interest rate becomes standard after the period ends.
- 0 per cent purchases with balance transfers – Includes no interest payable on purchases as well as balance transfers during the promotional period. With this type of card, you can transfer and repay your existing credit card debt interest-free while making purchases with no interest.
- 0 per cent purchases with frequent flyer points – In addition to the interest-free period, you can earn frequent flyer miles for certain airlines on purchases made for the entire life of the card.
- 0 per cent purchases with other rewards – In addition to the interest-free period, you can earn rewards such as cashback and concierge services for the life of the card.
Factors to consider when choosing a credit card with 0% on new purchases
Choosing the right credit card to suit your requirements means doing some research to make sure you know what you’re signing up for. RateCity’s credit card comparison tool can be used to compare the following features:
- Length of the interest-free period – The 0 per cent interest period usually ranges between three and 12 months, so it’s important to choose a card with an introductory period that makes sense for you. Calculate how much you plan to spend and whether you can repay that amount in full before the standard interest rate takes effect.
- Standard interest rate – Once the introductory period ends, you’ll pay the card’s standard interest rate on any remaining balance and future purchases. If you want to keep using the card after the promotional period, you may want to look for one with a lower ongoing interest rate.
- Annual fee – Most cards charge an annual fee, so consider if the interest-free benefits and other perks of the card are worth this cost.
- Eligible transactions – Some types of transactions, such as cash advances, may not be eligible for 0 per cent interest. Read over the fine print to see what’s excluded from the promotion.
- Additional benefits – Depending on your needs, you may want to choose a card that offers other benefits such as complimentary insurance or frequent flyer points. This way, you can continue to get the most out of your card after the promotional period is over.
^The best credit card for you may not be the best credit card for somebody else. Before selecting a credit card, compare the interest rates, fees and features of different options to see which ones may suit your personal financial goals. For assistance, consider contacting a qualified financial adviser.