How to find the best 0% purchase credit cards
AN interest-free credit card can help spread the cost of a big spending spree such as a new kitchen or even a car.
Whatever you are buying, here's how to find the best 0% purchase credit cards.
What is a 0% purchase credit card?
A 0% purchase credit card lets you spend money and make repayments without any interest for a set period.
Having 0% interest credit cards can be useful when making a large purchase such as a new kitchen, as you can spread the cost and focus on repayments.
There is no interest to pay until the 0% purchase period comes to an end.
How do 0% credit cards work?
Like any card, 0% credit cards give you a line of credit.
You can then use the card to make purchases and there is no interest added to your monthly repayments during the deal period.
The best 0% credit cards will be marketed based on their interest-free period, which could range from six months to almost two years.
The card won't be interest-free forever though and will move onto a pricey annual percentage rate (APR) at the end of the deal, or if you miss a monthly payment.
This is where the banks make their money as they rely on you falling onto the higher interest rates.
APRs can be as high as 20%.
You can beat this by checking how long the interest-free period is for and understanding if you can clear your balance before the deal term ends.
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What is a credit limit?
The credit limit is the total amount of credit you can borrow at any one time through a credit card.
This will be set by the credit card provider based on your income and credit rating, plus what they think you can afford.
There will be no extra fees as long as you stay in your limit, but you will be charged the APR if you go beyond it.
What does 0% interest on purchases mean?
Using a 0% interest card doesn't mean your purchase is free.
It just means you won't be charged any interest on your spending each month.
You still have to make the repayments though.
So, if you spent £500 during the month, your provider would ask you to make a minimum repayment or you can clear the balance.
There will be no interest to pay as long as you make a monthly repayment and are within your balance.
You can still make minimum payments each month without any interest being charged during the deal period. But make sure your balance is cleared before the term expires, otherwise there may be a hefty APR added to what you owe.
What should I used a 0% purchase credit card for?
You can use a 0% credit card for any spending except taking out cash as this is typically excluded on this type of product.
It is a good way to pay for expensive items such as a new kitchen or car as it is effectively like taking an interest-free loan.
This only works if you make the repayments and clear the balance before the end of the deal term though, so you avoid APR charges.
How to get the best 0% interest credit card
You can check deals with a bank or building society or search and scrutinise 0% credit card offers using a comparison website.
The best 0% interest credit cards will be offered to those with perfect credit ratings, providing they can afford them.
When you apply for a credit card your bank will check your credit score to see if you are suitable for the deal they are offering.
The better your credit score the more likely it is that banks will accept you for the best deals, as they only have to provide their best credit card offers to at least 51% of applicants.
If you have a bad credit rating the bank may not want to lend you money in case you can't pay it back.
Avoid applying for loads of different deals as each application makes a mark on your credit file and may end up decreasing your chances of getting the best credit card deals.
Comparison websites and credit card providers will often have an eligibility checker that can do a soft search without affecting your credit rating.
This will tell you which deals you are most likely to be approved for.
Is a 0% purchase card right for me?
A 0% purchase card is useful if you want to spread the cost of a big purchase or several items of spending.
It only works though if you can stay within your credit limit, make the monthly repayments and clear your balance before the deal expires to avoid falling onto the APR.
How do I know which 0% purchase credit cards I’ll be eligible for?
Some credit card providers and comparison websites offer eligibility checkers.
These do a soft search of your credit file so don't leave a mark but will give you an idea based on your income and credit rating of the interest-free purchase period you could be approved for.
Soft searches are recorded but lenders cannot see them. You can view all of your soft searches you have had conducted on your credit report.
You will be given a range of options on a comparison website and just need to click through to your chosen provider to complete an application.
Can I get a 0% interest credit card with bad credit?
Only those with a good or excellent credit score will get the best o% purchase credit cards.
It can be harder to get approved if you have bad credit such as from missed payments or county court judgements.
This doesn't mean you won't be offered anything, but you may only qualify for a shorter interest-free period.
Is there a minimum payment on a 0% credit card?
You will still get a bill each month with a 0% purchase credit card.
This is because you have to make monthly repayments.
The bill will show how much you owe and will also suggest a minimum payment for the month, that will usually be a small percentage of the balance.
There is no interest to pay if you only pay the minimum during the deal period, but the APR will be charged if you don't clear the full balance by the end of the term.
For example, if you had a 20-month interest-free purchase card, you could make the minimum payment each month for the first 19 months without paying any interest.
But you would need to clear the full balance in the final month otherwise there will be interest charges added onto the next bill.
How to work out the minimum payment on a 0% credit card
The minimum payment is the lowest amount you can pay on your credit card bill each month without being charged interest.
The figure is set by your credit card provider and is usually based on 1% to 2.5% of the balance.
There may also be a set minimum amount you have to pay.
What is the best 0% credit card?
The best 0% purchase credit cards can give you interest-free spending or almost two years.
The better your credit rating, the more likely you are to be approved for the top deals.
You can find the best credit card deals for your situation by searching on comparison websites, or direct with a provider using a soft search and eligibility checkers.
You may not always get the deal that is advertised and instead could get offered a shorter interest-free period.
There is no requirement to accept what is offered and you are free to shop around, but remember that too many applications could damage your credit score.
If you can wait, it may be worth taking steps to improve your credit score so you can get a longer interest-free period at another time.
Can I transfer a loan to a 0% credit card?
A 0% credit card can be used to pay off a loan.
This can be done using a money transfer card.
This lets you use credit to pay off an overdraft or other debts in your bank account and you then make interest-free repayments each month.
You will need to check your credit limit, but this essentially moves your loan onto your credit card balance.
Monthly repayments still need to be made but it could be cheaper than your loan.
However, if you miss payments, or fail to clear the balance before the interest-free period ends, you will be charged interest based on a hefty APR.
Does a 0% interest credit card affect my credit score?
Applying for an interest-free credit card can affect your credit score so avoid making too many applications at once.
Some comparison websites and providers will let you do a soft search first, which doesn't show up on your credit report, to give you an idea of your chances of being accepted.
This is a better strategy as lots of applications and rejections could lower your credit score and deter financial providers, making it harder to get loans and credit cards in the future.
Does my credit score matter?
Your credit score is one of the most important factors when you apply for a credit card.
The provider wants to see evidence that you can manage your debts and make your repayments on time.
A strong track record of paying your bills such as loans and credit cards will give you a top credit rating and help access the best deals.
However, a history of arrears, county court judgements and bankruptcies can reduce your rating and make it harder to access credit.
Additionally, it can also be hard to build your credit rating and access cards or loans if you have never had any form of debt, as there is no evidence about how responsibly you behave as a borrower.
How to extend 0% APR credit card
Interest-free periods are usually fixed so will move onto an APR at the end of the deal.
You could try calling customer services to haggle for an extension, but you would need strong negotiating skills, and an excellent credit rating to convince them.
Alternatively, there will be no interest to pay if your balance is cleared by the end of the interest-free term and if you stop using the card.
If there is money left to repay, you could move it onto a 0% APR balance transfer card, which is explained in more detail below.
How to get 0% APR on existing credit cards
The interest-free period on a credit card usually expires once the deal term ends.
This means any remaining balance or spending on an existing credit card will have interest charges added.
You can avoid these charges by using a 0% APR balance transfer credit card that clears your existing debts and move them onto a new card where you focus on repaying the balance interest-free.
What is a 0% balance transfer credit card?
A balance transfer credit card lets you clear debts on old credit cards and combine them into a new card where you just make repayments.
There will usually be an interest-free period that could run for up to three years or more plus there may be a transfer fee.
This should make it easier to payoff credit card debt as there will be no interest to pay - as long as you make the monthly repayments and clear the balance by the end of the deal period.
Some 0% purchase credit cards may include a balance transfer.
How do I make a balance transfer?
You can search for the best balance transfer credit cards on comparison websites or directly with providers such as banks or building societies online.
Cards will be advertised based on the interest-free period and any transfer fees.
Check your existing cards first to work out how much you owe, as there may be a maximum amount that some balance transfer credit cards will let you move.
To make an application, you will need to provide your name, address and an email as well as details of your income so a provider can assess your eligibility.
You will also need to provide details of how much money you want to transfer to the new card, but you can often do this after you have been accepted.
Check that the credit limit will cover the balances you want to payoff though.
Applicants usually need to be over 18.
If your application is approved, you will need to transfer the balances within a set period, usually around 60 or 90 days.
Your old balance will then be cleared and you can start making interest-free repayments on your new card.
There may also be a transfer fee so if you found a balance transfer card with a 3% fee, it would cost £30 to move £1,000 of debt.