What are 0% interest credit cards?

Should I get an 0% interest credit card? ID 26582712 © Cafebeanz Company | Dreamstime.com

0% interest credit cards are credit cards which don’t charge you interest for a set period of time.

People tend to get 0% interest credit cards so they can make expensive purchases upfront – such as holidays, festival tickets or concert tickets – and pay off how much they owe over a set period of time, spreading the cost of their initial payment.

0% APR cards are exactly the same thing as 0% interest credit cards – APR stands for ‘annual percentage rate’. The terms are interchangeable.

Why get a 0% interest credit card?

Consolidate and shift debt

If you’re paying huge interest fees on other credit cards, you could potentially look at shifting your debt to a 0% interest card – this is known as a balance transfer.

By consolidating your debt with a new credit card that has a 0% intro APR period, you can simplify your payments and focus on paying off your card as soon as possible.

You may also have more time to pay your debt, and if you maintain regular payments on time, you could start to build up your credit score.

Make big purchases you want to pay back over time

Lots of people use 0% credit cards for when they’re making a big purchase. The card will allow you to pay back the cost on a monthly basis and stretch out your payments, rather than paying the full cost all at once.

These kinds of cards are mainly used for buying goods – however, you can use credit cards to take cash out, or pay for things abroad. It’s a good idea to try to avoid doing this wherever possible, as you may be charged interest if you do. Taking cash out using a credit card can also have a negative impact on your credit score.

Emergency cover

Life can throw a fair few curveballs, and if you suddenly need to book plane tickets or get your car fixed, a 0% credit card can help you cover costs with minimum fuss.

It’s a good idea to avoid using your card too frequently, so find one with a high enough limit to cover any emergencies but with a low enough standard interest rate which will allow you to pay the card off quickly once life returns to normal.

What are the benefits of 0% interest credit cards?

  • You can avoid paying interest: However, make sure you’re aware of when the 0% interest offer ends so you’re not caught out with interest charges
  • Credit card protection: if you buy an item worth between £100 and £30,000 on your credit card, you will be able to claim your money back if the retailer goes bust or the goods you’ve bought are substandard
  • Spread the cost of purchases: If you don’t want to make a large upfront payment for an expensive item, you can spread the cost and pay back what you owe in manageable portions

What are the potential issues with 0% interest credit cards?

  • The 0% interest rate doesn’t last: That 0% interest rate is only good for an introductory period, after which your interest will increase to its regular rate. Also, just one late payment on these credit card accounts during the introductory period could mean your 0% interest rate could be cancelled early
  • Interest rates after the offer ends can be very high. If you carry on using the card after the introductory offer, the interest rates can then be very high
  • Balance transfers could cost you extra: The 0% interest rate is generally just for purchases, and balance transfers are often subject to a fee
  • The credit card company still makes money from you: Credit card issuers still make money from transaction fees charged to vendors, and often, from fees to you
  • Watch out for deferred interest – it isn’t the same as 0% interest: Deferred interest means if you don’t pay off the entire balance of the card in a given timeframe, then interest going back to the date of the purchase will be added on top of the remaining balance

What happens when the 0% interest introductory offer runs out?

You can keep using your credit card after the 0% period, but any existing balance will accrue interest, and any new purchases may add to this.

Should you continue to repay the balance in full every month, you may carry on being able to enjoy 0% interest fees.

If you want to transfer your balance to a new 0% interest credit card, there is sometimes a fee charged for transferring the debt, which is calculated as a percentage of the amount you’re transferring. It’s normally around 3%.

How to find the best 0% interest free card offers

If you’re looking for a 0% interest credit card, there are plenty of offers online. Once you think you’ve found a card which works for you, there are several things you should find out before you commit:

  • The length of the interest-free offer, and how much interest you could pay once it finishes
  • Check to see if the card offers any benefits – lots of credit card companies offer rewards, such as Air Miles or travel insurance
  • It’s a good idea to speak to your bank, and see if they can offer you a suitable product – lots of banks reward loyalty

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