0% purchases

If you're looking for help with your cash flow, then a 0% purchases credit card might do the trick.

How 0% purchase cards work

Many credit cards offer introductory rates that are interest-free for new purchases. The introductory rate is usually for a specified term after which the standard rate applies.

Occasionally credit card companies will offer an interest-free introductory rate that allows you to switch over your current debt from another credit card and to make new purchases - all for free! Sometimes you can even get credit cards that offer 0% interest on both balance transfers and new purchases for twelve months.

How your card provider earns their money - the big catch

Watch out for one catch though, when the 0% period for purchases doesn't look last as long as the 0% period for balance transfers. For example, a card may offer 0% for twelve months for balance transfers but 0% for only three months on purchases. You might think that any payments you make on this card after the first three months have expired will be set against any purchases you made that will now accruing interest at, say, 15% to 20% a year.

Look out for negative payment hierarchy

However, nearly every credit card provider will offset any payments you make against the lowest interest rate you are charged first - in this case, any balance transfer. The technical term for this sneaky little trick is 'negative payment hierarchy'.

The simplest way to avoid this problem is never to spend on a card that has a shorter 0% period for purchases than it does for balance transfers

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