Five Questions About: Purchase credit cards

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The Independent Online

What is a purchase credit card?

Although all credit cards can be used to pay for things, different cards are designed for different types of customer. For example, some are great for balance transfers, while others are good for using overseas. Purchase credit cards are designed to keep the cost of spending as low as possible, usually by offering a lengthy interest-free period. That makes this type of card useful for large purchases or for spreading the cost of an expensive event, such as Christmas or a wedding.

How long is the interest-free period?

The best purchase credit card on the market currently has an introductory, interest-free period of 13 months. That means that, for more than a year, all repayments will go straight towards clearing your debt rather than on interest.

Who will qualify for a purchase credit card?

As with any kind of credit card, only people with top credit scores will qualify for the best deals. Alternatives include lifetime low-rate cards, though these usually require an excellent credit history too. If you don't qualify for one of the best deals, remember that there is no interest to pay on any credit card as long as the balance is cleared each month.

Are there any catches?

Credit cards charge a higher interest rate on cash withdrawals, so these should be avoided. Most will also set any repayments against the cheapest debt first. That means that if the cardholder had an interest-free balance but then withdrew cash, they would need to clear the entire balance before they start paying off the expensive cash withdrawal. However, this will change by December, following an agreement between the Government and the card industry that payments must go towards clearing the most expensive debt first.

Do purchase credit cards accept balance transfers?

Some of these cards also accept balance transfers, usually for a fee of up to 3 per cent. It's best to use a card with the same length of time at 0 per cent on both balance transfers and purchases. Otherwise, when the interest-free period on one ends, interest will start accumulating on that debt until you have cleared the interest-free borrowing.

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