A Complete Guide to 0% Credit Cards


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By Sarah Watts
Updated on Wednesday 2 June 2021

Giant 0 credit card next to woman

0% credit cards can be the cheapest way to borrow money short-term, but only if you use them responsibly.

Using a zero percent credit card is effectively like taking out a small, short-term, interest-free loan, but you can only enjoy 0% interest on credit purchases for a certain amount of time. When the 0 percent finance period ends, the purchase interest rate can skyrocket.

Here's everything you need to know.

Are interest-free credit cards better than personal loans?

Yes and no.

Yes - for borrowing small, affordable amounts, short-term

0 credit cards can be better and work out cheaper than personal loans if you only want to borrow a small amount of money for a short period of time. You can pay the balance off in full before the interest-free period expires, meaning that you don't pay any extra on top of what you borrowed (unlike with a loan).

You should ensure that you never miss a monthly payment by setting up a direct debit, because if you miss one single payment, the 0% interest deal can be cancelled and it may also have a detrimental impact on your credit score.

No - for borrowing less affordable, large amounts, long-term

If you want to borrow a large sum of money (more than a few thousand pounds), then a loan is usually better than a 0% credit card. If you have an exemplary credit record and excellent credit score, you may be able to get a 0% balance transfer card limit of between £3,000 to £5,000.

However, unless you’re able to pay off the entire balance within the time limit (currently around 18-29 months on the top cards), then even if you are able to borrow a large sum, this method of borrowing is rarely a good idea for larger sums.

In addition, if you max out on credit borrowing, this can harm your credit record and if you miss one single payment or pay late, again, this can impact your credit score. So borrowing large sums for a short period of time is a risky strategy that is not advised, unless you have a huge disposable income and a solid, low-risk income.

By taking out a much safer personal loan instead, you will be able to extend the repayment period considerably and make your monthly repayments more affordable, despite interest being added.

Note: If you want to use a credit card to pay off another credit card, beware of lenders advertising ‘0% balance transfer credit cards’ as despite there being no interest on the balance you transfer, there is very often a transfer fee payable. The transfer fee is usually a percentage of the balance you are transferring - usually between 1 and 3%. Transfer fees will typically apply on credit cards offered to those with poorer credit scores. There are many lenders currently offering a no fee balance transfer deal (usually to borrowers with healthy credit scores) but the interest-free period is usually much shorter on these types of cards. You should also avoid using this type of card for any purchases as the interest-free period will very often only apply to the balance you transfer at the outset and will not apply to any subsequent purchases.

What can you buy with a 0% credit card?

You can buy just about anything you like with a 0% purchase card, from a pair of socks to a holiday abroad. As long as a vendor accepts your credit card, there is no criteria on what you can or cannot purchase.

Savvy borrowers tend to use a 0% credit card for larger, one-off purchases so the repayment period is not muddled and so they can set up a direct debit to clear the entire balance within the interest-free period.

For recommendations on what you should purchase with a credit card, take a look at our guide: The best things to buy with a credit card.

Conversely, there are certain purchases you should avoid making with a credit card. For more info, check out our other guide: What not to buy with a credit card.

How do 0 credit cards work?

A no interest credit card allows you to buy goods or services using your credit card and no interest will be charged on any balances you accrue (owe) for a set period of time.

When your interest-free period ends, the lender will start to charge interest on any balance owed at their variable representative annual percentage rate (APR). This rate is typically quite high and can easily lead to you running up a debt you cannot afford to repay, if left unchecked.

The best way to use an interest-free credit card is to make sure you set up a direct debit monthly payment that will ensure you clear the entire balance within the 0% interest timeframe.

Most responsible borrowers use a 0% credit card for large, one-off purchases so it’s easy to calculate the monthly repayment required to settle the outstanding balance before interest is charged. If you use this type of card for lots of random, smaller purchases, it’s more difficult to keep track of the interest-free period for each individual purchase and calculate the required monthly payment to clear the entire balance before interest is charged.

The only major drawback with this type of borrowing is if you miss a payment (or pay late), because if you do, the lender can cancel the 0% interest arrangement and start to charge their standard interest rate on the full balance outstanding. This rate is typically in excess of 20% APR!

What does 0% on 3-month purchases mean?

0 percent on a 3-month purchase means that you will not be charged any interest at all on a purchase for a total period of 3 months from the date of your purchase.

After 3 months elapses, any balance left owing will be charged at the lender’s standard APR.

Are 0% interest cards good?

Yes, 0% interest cards can be an excellent short-term borrowing solution if you make sure you follow Martin Lewis’s 3 golden rules which are that you should:

  1. Never miss one single monthly payment

  2. Clear the balance outstanding within the interest-free period

  3. Not use your 0% purchase card to withdraw cash

Can I get a 0% credit card?

You’re more likely to get your application for a 0% credit card accepted if you have a good credit history and score.

Usually, a 0% or low-interest credit card is only offered to borrowers with a healthy credit score and a history of responsible borrowing. So if you have no credit history, this can seriously thwart your eligibility as if a lender can’t see how you have managed to borrow previously and see evidence of your creditworthiness, then they will usually refuse any credit application.

Before applying for any type of credit card, it’s always a good idea to check your credit files and scores with all of the main UK credit reference agencies. Different lenders use one or more of the three main agencies so check your credit file with all three is always a good idea.

>>> You can request a multi-agency credit report for free from checkmyfile.com <<<

Once you obtain a full credit report, you should check it thoroughly for any incorrect entries and if there is something on your report that shouldn’t be there (e.g. a default that is more than 6 years old), contact the relevant credit reference agency and request that they remove it.

If your credit score is low with one or more agencies, there are ways you can seek to improve this - check out our guide: How to improve your credit score immediately.

Can a 0% credit card improve your credit score?

Yes, an interest-free credit card can boost your credit rating, but only if you use it responsibly and never miss a payment or pay late.

However, maxing out on your credit utilisation rate is never a good idea and can harm your credit score. For example, if you have a credit limit of £3,000 and use up £1,500 of that credit limit, you have a 50% credit utilisation rate. You should ideally keep your utilisation rate between 20% and 25% and definitely avoid exceeding 50% as this will be an amber flag to a lender and could affect your ability to borrow more money.

Read our guide below for more information and tips regarding credit cards and your credit score.

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