0% Credit Cards: What They Offer and How They Work
Looking for the best 0% credit cards? Learn how the interest-free period works, how to use it for a balance transfer, and how to compare top offers without fees.
A 0% interest credit card is a powerful piece of kit to have in your financial toolbox. First, it's important to get to work learning how the interest-free period works, how to use it for purchases, and how to compare top offers without fees.
How do 0% credit cards work?
As you may have guessed, 0% credit cards don’t charge any interest on purchases made with them during an introductory period, typically between one and three years. This can help you manage your cash flow by giving you the ability to spread payments over a period of time without paying a penny more than you originally spent.
Why and when to get a 0% credit card
The introductory period can be a helpful feature when you need to buy a big-ticket item, such as a piece of furniture or a holiday. Or when you’re making lots of smaller purchases as part of an expensive project, such as a wedding or home renovation. It’s also what makes a 0% interest credit card a cheaper alternative to a personal loan.
Another advantage of using a 0% credit card is security when making costly purchases. As with all credit cards, when you spend £100 on up to £30,000 on a purchase, the card provider has to step in to save the day if something goes wrong with a supplier. This is part of the protections available under section 75.
Unfortunately, all good things must come to an end, and that’s certainly true of 0% credit cards. They don’t stay interest-free forever. Once the introductory 0% period ends, interest will be charged at the card’s standard rate.
Are 0% credit cards worth it?
There are a couple issues to consider before choosing an 0% interest credit card.
First, not all spending counts as a purchase. For example, sometimes cash withdrawals and transactions made abroad might be charged interest. And while you may be able to make a balance transfer from an existing credit card and get a 0% introductory period, you will soon start to pay interest on it.
Second, as with most financial products, the 0% interest credit cards offering the best deals are usually reserved for customers with the highest credit scores. So you may not be offered the maximum interest-free period if your score isn’t great. If it’s poor, you may be turned down altogether.
How to choose a 0% credit card
When comparing 0% cards, here are two points to consider:
- How long the 0% interest period lasts.
- The interest rate your card will revert to after the introductory 0% period ends.
In general, the card offering the longest 0% interest period offers you the most flexibility in terms of managing your finances. But remember, if you’re unable to repay your debt in full at the end of the interest-free period, the cost of your borrowing will rise sharply.
Formally applying for too many credit cards in a short space of time can have a negative impact on your credit score so it always makes sense to find out if you’re eligible first.
» COMPARE: Top 0% credit cards
How to apply for and get a 0% card
You can normally apply through the comparison site and get an immediate decision, or you can apply directly to the card provider.
Once accepted, you’ll be billed monthly and usually have to make a minimum repayment of £5. You might find it convenient to set up a direct debit to cover these payments, so that you don’t accidentally miss one. Failure to make repayments can result in penalty fees as well as the loss of the interest-free period. It can also harm your credit score.
Laura Whitcombe is a freelance journalist, campaigns consultant and co-author of Money Made Easy 2015/16 published by Harriman House. Read more