You are right that a credit card with a 12-month interest-free purchase period will not charge interest for a year.
This means that you could pay for your holiday on the card and then repay the debt by making the minimum monthly repayments using your savings, before clearing the balance completely in the fi nal month. This would allow you still to earn interest on your savings in the meantime.
However, I would suggest that you proceed with extreme caution, as there are several pitfalls to consider.
First, make sure you make a note of when the interest-free period ends. Do not wait for the credit card company to remind you – plan ahead and ensure that you have suffi cient funds available to clear the whole of the balance before a higher rate of interest kicks in.
Second, check what the 0% interest rate actually applies to. Most 0% cards on the market charge no interest on balance transfers (although there will be a fee for transferring a balance from another card); a smaller number waive interest on new purchases. But you will almost certainly be charged interest on cash advances – so don't withdraw cash on the card to cover your spending while abroad.
Crucially, just because a card has a 0% interest rate doesn't mean you have nothing to pay. You will still need to meet the minimum monthly repayment on the card, and if you miss a payment, the interest-free period is likely to be terminated and the interest rate could rocket up. So make sure you set up a direct debit to cover these payments.
While using a 0% card in this way can be beneficial in some circumstances, it is only advisable if you are extremely organised with your finances and have no other debts.