Purchase credit cards

What is a purchase credit card?

A purchase credit card is a card that offers a special rate on all spending. They often offer zero per cent introductory rates, with some offering up to 18 months before any interest is charged, enabling you to spend and to spread the payments over a period of time. Spending on a purchase credit is a way to borrow money for free – you can use your card to pay for an item, the credit card company fulfils the payment allowing you to pay back the credit card company at a later date.

Are there are any drawbacks to a purchase card?

Whilst a purchase card is a great way to spread repayments over several months, the zero per cent offers can be withdrawn if you don’t keep up on minimum payments (typically 3% of the balance plus any fees), making the cost of borrowing rise substantially. Often, as part of your application you’ll be given the opportunity to set up a direct debit to pay the minimum each month, ensuring you meet the criteria to keep the offer.

It’s also worth considering how long it will take you to pay the balance, for example if you purchase an item worth £2,500 and pay the minimum each month it will take you longer than any introductory period to clear the balance. After the initial period the rate will increase and you’ll start to be charged interest on the balance, it’s then at this point you could complete a balance transfer and move the balance to a new credit card, or alternatively set up a direct debit to a fixed amount each month to ensure that the balance is cleared before the end of the promotional period.

Can anyone get a purchase credit card?

Purchase cards are typically aimed at those with good credit rating. If you are struggling with payments and are considering a credit card then a purchase credit card may not be the card for you. You can use our free Card Matcher tool to check the likelihood of being accepted for a card before you apply.

Which providers offer purchase cards?

Many credit card providers offer cards with zero per cent introductory rates on purchases, but typically the longest introductory periods are provided by Barclaycard, Nationwide, Tesco and Halifax.

Glossary of key terms for purchase credit cards

Purchases

This is where you pay for goods or services using your card– it doesn’t include things like cash withdrawals, cash advances or money transfers.

Purchase Introductory Rate

This relates to the interest that is applied to any purchases made and the duration that the introductory rate is applied for. So, for example, a 0% purchase introductory rate for 12 months will mean that no interest will be added to your account for any purchases made for 12 months from the date the account is opened. When the introductory rate ends then you will be charged interest at the card's annual percentage rate (APR).

To ensure you maintain any introductory rates applied to your account you must manage the account in line with the issuer’s terms and conditions. Specifically, that means that you must always make at least the minimum payment on time each month, and must remain within your set credit limit.

Available Credit

Your current credit limit minus your current outstanding balance.

Cash Advances

You obtain a cash advance by using your card to draw cash. Cash advances will invariably attract interest from the moment they are made, so there is no 'interest free' grace period.

Cash Advance Fee

You will also be charged for using your card to draw cash. The charge might be made as a flat-rate fee on each withdrawal or taken as a percentage of the amount of cash advanced.

Cash Advance Rate

This is the rate of interest attracted by your cash advance. Interest is invariably attracted from the moment it is made and the rate of interest for this facility could be higher than the card provider’s standard rate on regular purchases.

Credit Card Issuer

This is the company who processes payments made with the card. The three main issuers are Mastercard, VISA and American Express.

Credit Limit

This is the maximum amount that your credit card company will allow as credit i.e. a limit that cannot be exceeded as the balance owing on your credit card.

Joint Account Holder

Unlike an authorised user a Joint Account Holder has the same borrowing privileges as the main account holder, but they too will be responsible for the repayment of the account balance.

Withdrawal Limit

This relates to cash advances and is the maximum you can withdraw, either at a cash machine or over the counter at a bank, in any single day.