Please explain 0% credit card

[barker22]

Hi guys
It may seem like an obvious question but I am being thrown by various 'jargon'

I am looking to buy another motorcycle for around 3k ish. I have the cash no problem however I can't bear to see that full amount leave my account. (It will break my heart )
I have read you can use one of these cards as a free finance option. 0% on purchases for 18 months is the deal I am looking at.
I just want confirmation on how it works. I have a very good credit rating and as I say the full amount in cash should something all go horribly wrong.

This is how I picture it working
I pay 3k on CC. As long as it meets the minimum payment, I spread 3k over 18 months = £166. Is that all I pay, how does the CC company make any money? Is that correct.

[Butter Face]

Yes that's correct.

They make money because they expect people to spend more, pay back less, miss payments etc.

If you pay, cut it up, set up a DD to pay the right amount and you'll be fine.

[VBRJ]

Agreed.

Remember that of you have any money still outstanding on the card at the end of the 0% period, they will start to charge you interest on the remaining money.

[grumbledoak]

The CC company gets a 2-4% cut of your gross spend, that's how. Anything else is a bonus.

You may find the dealer won't take it, or will want £3k + 2% to cover the charge.

[barker22]

grumbledoak said:

You may find the dealer won't take it, or will want £3k + 2% to cover the charge.

Ahh, yes I was wondering about the charges, I have seen various signs when entering shops about 2-3% for using a credit card but never give it much thought. Still I think £60 to £90 isn't a bad charge for 3k though 0% is better.

[Sir Bagalot]

Generally it's 1.5-2% cut for the CC.

Back in the day when I was a Credit Card Rate Tart (when they didn't charge for balance transfers) they made their money on people who did BT's with the intention of paying off but then failed to do so. Across the companies it was an average of 45% of people.

[Shaoxter]

Also to state the obvious, make sure the credit limit you get is above £3k.

[barker22]

Shaoxter said:

Also to state the obvious, make sure the credit limit you get is above £3k.

Is that to cover the charge for using the card(1-3% if there is one at all) or some other spanner you are about to throw my way?

[Butter Face]

barker22 said:

Shaoxter said:

Also to state the obvious, make sure the credit limit you get is above £3k.

Is that to cover the charge for using the card(1-3% if there is one at all) or some other spanner you are about to throw my way?

I think he means that if you apply for one make sure you get one that's £3k+ as you won't buy a £3k bike with a £1500 limit!!

[jammy_basturd]

It also means that on BT cards can't use your full limit, so you wouldn't be able to buy a £3k bike with a £3k CC.

[bicycleshorts]

Worth adding, even though it's 0%, there's still a minimum payment every month. It'll be a nominal amount (e.g. 20 quid).

Seems obvious but it certainly wasn't to me when I got my first CC a couple of years ago till I got a nice fine.

[barker22]

Ah I see. So I take it a balance transfer is just that. I could transfer 3k into my current account if I had a 3.5k limit say, and just pay off the card as a finance alternative.
I imagine if there was a 0% for 18months on BT then that would work out cheaper than paying a 3% charge for paying using a CC in a store. Hmmm. Something to think about.

[barker22]

bicycleshorts said:

Worth adding, even though it's 0%, there's still a minimum payment every month. It'll be a nominal amount (e.g. 20 quid).

Seems obvious but it certainly wasn't to me when I got my first CC a couple of years ago till I got a nice fine.

Yeah my plan is basically to spread 3k over the 0% term(18months)
I imagine the minimum payment would be less than the £166 a month it would cost to pay it off in 18 months. If it is more that, that is fine also but my whole aim is to use it as a 0% finance package as such.

[briang9]

seems to have got a bit confusing here, there is a difference between cards offering 0% on purchases and Balance Transfer cards, I presume from your OP its a 0% on purchase card you are thinking about? in that case there will be no Balance Transfer fee obviously

[barker22]

briang9 said:

seems to have got a bit confusing here, there is a difference between cards offering 0% on purchases and Balance Transfer cards, I presume from your OP its a 0% on purchase card you are thinking about? in that case there will be no Balance Transfer fee obviously

I think that has now become part of my question. Sorry.
I was looking to 'purchase' but that may incur a charge of perhaps 3% just for using the card at the store.
So now I am thinking that a balance transfer may work out cheaper if it is 0%, as I will not have the 3% charge as the cost will come straight out of the current account I transfer to.
Am I thinking along the right lines?

[briang9]

No, balance transfer would attract a fee, personally I would try and avoid anyone who tries to pass on the cost of paying by credit card to the buyer, They need to consider that as part of the "cost of sale" I suggest, have you confirmed that the vendor will try to charge for using a credit card?

[jammy_basturd]

Bear in mind that most balance transfer cards won't allow you to transfer funds into your account. You're meant to pay off CCs and loans with them.

One of the only BT cards that does allow you to transfer funds into a current account is the Virgin CC, supposedly so you can pay off an overdraft. There will be a fee to do the transfer and any spend on a BT card will attract a massive APR.

Note that you can't just get a BT card and spend on it expecting to get 0%. You can't just walk into a dealership and wack £3k on the card. That is seen as spend rather than BT.


So what you maybe after instead are the cards offering 0% on spending for X months, which are slightly different.

[briang9]

Some CC will offer existing customers a cash transfer to their bank account option, but there will be a cost to do so, similar amount to what Balance Transfer cards charge, maybe worth asking any existing card issuer that you have if they have any deals on at the moment.

[barker22]

Right so it is all starting to make sense then. It would seem that a 0% on purchases is the way forward and would work out truly 0% provided the vendor doesn't have a CC charge. Thanks for the help

[anonymous-user]

You need 0% on new purchases card to which fees will apply in someway or another. The balance transfer cards make money by the transfer fee which can work out more than an equivalent loan, however unless your going north of £8k ish the % Apr on a loan won't be comparable.

If you want to borrow less than that over a year or two they are the best way other than friends and family.

Virgin/MBNA tend to do good Balance and cash transfer cards. Which may work out less than a 0% new purchases card depending on dealer/card charges

Edited by anonymous-user on Sunday 2nd March 22:40