0% credit cards are simply credit cards that let you pay no interest for a fixed period, on transferred debt or purchases, or sometimes both. 0% credit cards are also known as ‘interest-free cards’, ‘balance transfer cards’, ‘0% purchase cards’, or ‘balance transfer and purchase cards’, depending on what features they provide.
There are a many variables to consider when choosing a 0% card, including the APR, any fees associated with transferring a balance, and the duration of the interest-free period they offer.
Which 0% card should I apply for?
Before applying for any 0% credit card, you need a good understanding of your current financial situation, and if possible how your financial situation might change in the future.
For instance, you should always check your credit history before applying for credit. That way, you’ll gain an insight into what lenders will see when assessing you. Applying for multiple credit cards in succession can harm your credit score, but you can mitigate this by only applying for cards that are likely to accept you, rather than simply opting for the market-leading product.
After looking at your credit file, you need to consider why you want a 0% credit card. Do you have large existing debts on your current credit cards? Do you have a large purchase (or purchases) you want to make using your card, while avoiding interest charges? Or do you need a card that allows you to transfer debts and spend on your card with no interest payable? The answer to these questions will help you define which card is right for you.
Balance transfer cards
Balance transfer cards are among the most popular credit cards in the UK today. They let you transfer a balance (or several balances) from other credit cards to a new credit card with 0% interest payable for a fixed introductory period. Some also offer a 0% interest-free period for purchases, but these tend to much shorter in duration. Balance transfer cards are ideal if you want to consolidate your debts – or if you want to stop paying double-digit interest so that you can pay off your debt.
There is almost always an up-front fee to transfer balances to your new card – typically between 0.5% and 4%, which is added to your debt when it’s transferred. If you shop around you can find some ‘no balance transfer fee cards’ that offer completely free balance transfers, though the interest-free period tends to be a little shorter.
It should be noted that the advertised balance transfer duration and fee is usually offered on the condition that a balance is transferred within a specified period from account opening (usually within 90 days). Any debt transferred after this period is charged at a higher fee.
Some balance transfer cards offer a 0% money transfer period too, meaning that you can transfer money from your credit card to your bank account. This is especially useful if you have other debts you wish to consolidate, such as loans and overdrafts. The fee for this transaction tends to be higher – usually between 2% and 5%.
The APR on balance transfer cards – that is, the interest rate you’ll pay on any debt remaining after the introductory period – can differ from card to card, so it’s always worth checking before applying.
There can be other perks with balance transfer cards, such as cashback on purchases, no fees on foreign exchange, store reward points, or branded discounts or freebies.
Balance transfer card tips and tricks
- It is always best to calculate how long it will take you to pay off your balance transfer, and apply for a card that offers an adequate duration, rather than applying for a market-leading card that you may be rejected for. Alternatively, you could start with a card offering an eligibility checker, which assesses the likelihood of you being accepted, without leaving a mark on your credit file.
- You may not get the 0% duration that you applied for, or indeed the advertised APR rate. Before applying for a product, check whether your preferred card offers alternative rates (sometimes called ‘personal pricing’ or ‘downsell rates’) to applicants whose credit score is not high enough to be accepted for the advertised rate, and determine whether these rates would be acceptable.
- Try to avoid using your balance transfer card to make purchases. Purchases tend to incur a higher rate of interest far sooner than transferred balances, which can quickly wipe out any savings you were hoping to make. Ideally, you want every pound you repay to go towards clearing your existing balance, not servicing debt repayments on new spending.
- Always remain within your credit limit and pay at least your minimum repayment on time every month. It’s advisable to set up a direct debit so that you don’t have to remember. If you break any of the terms of your agreement, your credit card issuer will retract the introductory offer immediately, and you will be left paying your debt on a double-digit interest rate.
- Work out a budget and repayment plan, to ensure that you have paid off your debt by the end of the introductory period. If you have any balance left over once your interest-free period ends, look for another balance transfer card to transfer that debt to. Ideally, you should make a note of the end date of your promotional offer, and then start looking for a card around six weeks before, to ensure that everything is sorted out before the 0% period ends.
0% purchase cards
0% purchase cards let you buy stuff on your credit card without paying any interest on those purchases for a fixed period. These cards are ideal if you want to make large purchases, gain the additional purchase protection that credit cards offer, and want to avoid (or at least defer) the interest these purchases would otherwise incur.
Some 0% purchase cards offer interest-free balance transfers as well, but the 0% period is usually much shorter than for purchases.
As with balance transfer cards, 0% purchase cards can come with a whole host of other benefits, such as cashback and rewards – but also some strict caveats to watch out for, too, so that you don’t end up paying a much higher rate of interest than you planned.
0% purchase card tips and tricks
- Don’t over-spend on your 0% purchase card. If you are unable to repay the entire balance before the introductory rate ends, your interest will skyrocket.
- As with balance transfer cards and other credit cards, always ensure that you remain within your credit limit and make your minimum repayment on time. Any failure to comply with the terms of your credit agreement will see you forfeit your preferential introductory rate immediately, leaving you with a balance repayable at high standard interest rates.
- Never use your 0% purchase card to withdraw cash, as this is not considered a ‘purchase’. There will be a fee to pay for such a transaction, and interest will be charged immediately – and often at a higher rate than the standard APR. If you need to take out cash on your credit card, it may be better to apply for a money transfer card, where cash can be transferred to your bank account and paid off interest-free over a period. Money transfers do charge a fee, though – usually between 2% and 5%.
- Purchases carried out abroad are not usually included in your 0% purchase deal – so there may be some hefty fees and interest will become payable on that spend immediately at the standard APR.
Balance transfer & purchase cards
Balance transfer & purchase cards offer the best of both worlds – an interest-free period on both balance transfers and purchases. Usually you’ll get the same 0% interest-free period for both purchases and balance transfers, though the duration is usually shorter than a market-leading card that only does one thing. Balance transfer & purchase cards are ideal if you plan to use your credit card for both transferring debt and spending.
0% credit cards can be very useful as a way of consolidating and paying off accrued debt, or paying off credit card purchases over time with no interest. Check your credit rating before applying, remain within your credit limit, make your minimum payment on time, and try to ensure that you’ve paid off the balance in full before the end of the introductory period.
If these golden rules are followed you can emerge debt-free – and then perhaps your next credit card can be something much more rewarding, such as a cashback card, reward card, or even an airmile credit card – the sky’s the limit!
0% interest credit card FAQ
I have a bad credit rating – can I still get a 0% APR card?
The market-leading balance transfer and purchase credit cards are the reserve of those with a blemish-free credit history, so you are unlikely to be accepted if you have defaulted on payments in the past. Some cards for bad credit do offer a small window of 0% interest on either balance transfers or purchases, which would be easier to obtain (although the credit limit tends to be lower and the APR higher). You may be better suited to a credit building card, where you can prove your creditworthiness by spending within your credit limit and paying your repayments on time every month. Over time you will see your credit score improve and you will be in a much better position to apply for the more rewarding cards.
Can I get a 0% credit card that offers rewards?
Yes. There are reward cards available which offer 0% on balance transfers and/or purchases, though these interest-free durations tend to be lower than specific market-leading balance transfer cards or 0% purchase cards.
Can I use my credit card to take out cash?
Yes, but it will prove to be a costly endeavour, and should be avoided at all costs. You will be charged a cash withdrawal fee (typically around 3% of the amount withdrawn), and usually you will also be charged a higher interest rate on that withdrawal – sometimes up to 10% more than the standard APR. Further to this, in general, there is no interest-free period with cash withdrawals, so you are charged interest from the moment you take out the cash. If, despite all this, you need cash and have no other option, it is better to apply for a 0% money transfer card, where you can transfer money from your credit card to your bank account, and pay off the credit card debt over time. There will be a fee payable for a money transfer (typically between 3% and 5%), but no interest to pay for a fixed period.
Can I use my 0% APR card abroad?
Yes. Your 0% interest card functions like any other credit card when used abroad. However, you should always investigate whether you will incur any additional overseas fees before you travel. In particular, look for the foreign transaction fee (for purchases using your card) and the fee for ATM withdrawals. If the fees are high, it may make more sense to opt for a dedicated travel credit card, as some of these transactions are free. Alternatively, you could check out the range of prepaid travel cards, which can often offer more favourable exchange rates and free transactions.
If I miss just one payment, will I lose my 0% interest period?
Yes. The 0% interest-free period on either balance transfers or purchases is offered under strict conditions that you spend within your credit limit and repay at least your minimum payment on time every single month. Failure to adhere to these conditions will result in an immediate removal of the offer, leaving you to pay your remaining balance at the standard APR.