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0% Interest on Purchases Credit Card: Can be Less Expensive and More Flexible Than a Short-Term Bank Loan

Most banks will only offer a short-term loan with a minimum repayment period of one year, which may, on the face of it sound fine. However what happens if the customer wants to borrow over a shorter period or wants to repay the loan earlier?

Bank Loan

With most banks early repayment is not an option or if it is there are punitive early settlement charges and as already pointed out 12 months is usually the minimum repayment period. Remember banks are in the business to make money, the shorter the loan period the less interest they make.

0% on Purchases Credit Card

So what’s the answer? The answer is the 0% on purchases credit card; don’t confuse this with the 0% balance transfer card.

Many credit cards offer, to new customers, an introductory 0% interest on purchases facility although the length of the offer will vary from card to card but can range from 3 –10 months.

It’s worth bearing in mind when a credit card company issues a new card the initial credit limit may not be particularly high, it will in part depend on a person’s credit score. As a rule of thumb a new card might offer around £1,000 — £1,500 as a starting credit limit.

Short Term Interest Free Loan

At this stage there are some questions to be considered. Can the item to be purchased be bought with a credit card? Because almost certainly if the cash amount is withdrawn a hefty charge is made. Can the monthly repayments be met and can the remaining balance on the card be repaid in full within the interest free period? If the answer is yes the customer has in essence a short-term interest free loan.

If the credit card balance is not repaid in full within the interest free period the standard rate of interest rates will kick in, remember the rate will vary depending on the person’s credit score.

Credit Score

Don’t be tempted to repeat this process too many times because a number of credit card applications made within a short period, will adversely affect a credit score.

If there is still a balance left after the introductory period it could be transferred to a new card with a 0% interest rate on balance transfers, so be aware what the best credit card balance transfer options are out there.

0% Balance Transfers

There are some other really important details to be aware of when using credit cards. Some cards will offer a 0% interest rate on purchases and balance transfers. If using both facilities people must be aware that after the introductory rate has finished the monthly repayments will be used to pay off the cheaper debt first, that is the 0% purchases leaving the more expensive debt, the balance transfer, to speedily accrue interest charges while remaining ‘locked in’ until the cheaper debt has been repaid.

The only answer to that is to try to pay more than the minimum payment each month.

This information is obtained from the reputable sources listed below and is offered in good faith. However it’s essential to thoroughly investigate the market before selecting a financial product.


How do Credit Card Cash Advances Work? A High APR, Short Term Debt Solution for Financial Difficulties

Many consumers that are struggling with short-term financial difficulties are turning to high APR credit card cash advances to cover household bills. Statistics produced by show that in excess of 700,000 people are withdrawing cash from one credit card in order to make the minimum monthly repayments on another.

What is a Credit Card Cash Advance?

A credit card cash advance is an opportunity for a consumer to borrow money against their permitted credit limit. A credit card cash advance doesn’t simply extend to withdrawing money from a cash point machine, it can also be a credit card cheque or a gambling transaction. Consumers pay a high APR and various withdrawal charges for the convenience of credit card cash advances.

Is a High APR Credit Card Cash Advance a Good Way to Borrow Money?

Using a credit card cash advance or credit card cheque represents a more expensive form of credit card debt. It is estimated by that the average APR on a credit card cash advance is 29.97%. have calculated that the average APR on regular credit card debt is 17.42%. This means that those borrowing money are paying a premium of 12.5%.

Is a Credit Card Cash Advance or a Payday Loan Preferable?

Consumers that are struggling with bad credit may find that a credit card cash advance represents a cheaper means of borrowing money than a Payday loan. The monthly amount of interest payable on a credit card cash advance is in the region of £2.50 per £100 borrowed. Whilst this is a high APR, it compares favourably to a Payday loan which charges £20-25 per £100 borrowed.

Avoid Credit Card Cash Advances as a Source of Long Term Borrowing

Credit card cash advances should not be construed as a source of long term borrowing. Creating £10,000 of credit card debt will result in about £3,000 of unwelcome interest per annum. This reduces future disposable income by a further £250 per month, which only serves to exacerbate financial difficulties and personal debt.

Those that already have a bad credit rating may find that a credit card cash advance is the cheapest source of short term borrowing. Whilst a cash advance can help with emergencies, such as paying the mortgage, when financial difficulties are an issue, it may be better to utilise a debt solution, such as an Individual Voluntary Arrangement, to free-up money to pay essential household bills.

Those struggling with financial difficulties and personal debt may be interested in finding out whether they have an illegal credit card or unenforceable loan agreement. Individuals that are struggling with serious debt problems may be able to write-off debt with an Individual Voluntary Arrangement, also known as an IVA.

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