Compare interest free balance transfer & purchase credit cards

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What are interest free credit cards?

There are two main types of interest free credit card:

  • 0% balance transfer card You can move debt from an existing card to a new one and you won’t be charged interest on the balance you transfer, for a set period. You’ll usually have to pay a fee to transfer the balance and you’ll need to keep up the monthly minimum repayments.
  • 0% purchases card This offers zero interest on your spending for a certain period of time, assuming you keep up the minimum monthly repayments. After that period, you’ll be charged interest on any outstanding balance.

You can also get cards that offer 0% on both balance transfers and purchases.


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How do 0% balance transfer cards work?

A balance transfer card is designed to help you pay off your existing credit card debt quicker, by reducing the amount of interest you’re charged on the debt.

Let’s say you currently have a credit card that you’ve used for some expensive purchases, such as home improvements. If you’re not in a position to pay the balance in full each month, you’ll have to pay interest on the amount you owe – typically 20-22%.

A balance transfer card lets you shift your debt to another card, with no interest to pay for a set period – possibly up to 30 months for those with a flawless credit history.

It’s important to remember that, at the very least, you’ll have to make the minimum monthly repayments and clear the outstanding amount before the 0% deal expires. Otherwise, you could be saddled with some hefty payments.

Be aware that you can’t transfer a balance between two cards from the same provider.

How do 0% purchase cards work?

A 0% purchase card helps you manage your spending, as you can spread the cost of purchases across several months without paying any interest. If used with care, a 0% purchase card can be a useful way to buy big-ticket items, such as furniture, that you know you won’t be able to pay off in one go.

The 0% interest period lasts for a fixed length of time, for example, 18 months. So you should aim to clear the balance before the deal ends or you’ll pay a high rate of interest thereafter. You’ll need a good credit score to qualify for the best 0% deals.

Should I get a combined 0% balance transfer and purchase card?

This depends on your financial circumstances. If your primary aim is to move existing debt, or you only want a card for new spending, you might find that an individual balance transfer or purchase card gives you more options.

But if you want to spend and shift debt, a combined interest-free card could be a good idea. It lessens the impact on your credit score, as you only need to make one application to get both facilities. However, generally speaking, combined cards have a higher transfer fee, and sometimes the 0% purchase period differs from the 0% balance transfer period.

Frequently asked questions

What are the advantages of interest free balance transfer and purchase credit cards?

There are several benefits to taking out an interest free credit card. They can help you:

  • Spread the cost A card offering 0% on purchases can help you buy expensive items, such as electrical goods or a new sofa – allowing you to spread the cost over several months, interest free.
  • Pay off outstanding debt A 0% balance transfer card can help you pay off what you owe more easily, since you can temporarily avoid the high interest rate that comes with a standard card.
  • Limit your number of cards Applying for several cards at the same time can damage your credit rating, making providers (such as mortgage lenders) wary about lending to you. You can keep the number of cards you have to a minimum with a single card that offers 0% interest on both balance transfers and purchases.

What are the disadvantages of interest free balance transfer and purchase credit cards?

There’s a few things to be cautious of before applying for an interest free credit card, including:

  • Balance transfer fee You’ll usually be charged a one-off fee to move your balance to a new provider. This is a percentage of the amount being transferred, typically up to 3%.
  • Missed payment penalty If you miss a payment, you’re likely to lose the interest free deal. So think about setting up a direct debit to cover at least the minimum amount each month.
  • Different 0% periods A combined card might not have the same timeframe for interest free balance transfers and purchases. Once the 0% period is up, you’ll automatically be put on a high interest rate, so keep a close eye on when each interest-free period ends.

Why is checking the Annual Percentage Rate (APR) important?

While an interest free balance transfer and purchase credit card has its benefits, it’s worthwhile double-checking the rate of APR. It’s important that you’re clear about how much you’re liable to pay on any outstanding balance, once your zero rate of interest expires.

For example, let’s say your APR rate is 18% and you have £1,000 left owing on your card; the interest charged on top of your balance for 12 months will be £180, so you’ll end up paying back at least £1,180. There could also be additional charges, such as late payment fees, depending on your terms and conditions.

What do I need to think about before I apply for an interest free balance transfer and purchase credit card?

When you apply for credit, the lender will check your credit history to see whether you’re a responsible borrower. Often, the deals you see advertised are only available to people with the highest credit scores, so you may not get the 0% timeframe or credit limit you were hoping for.

Every application you make for credit leaves a footprint on your credit file. If a lender sees multiple applications, it could be interpreted that you’re desperate for funds, which may lead to your application being rejected.

Knowing your credit score is important as it will give you an indication of which cards you’ll be eligible for. Alternatively, you can run an eligibility check quote, which lets you see how likely it is that you’ll qualify for a card before you apply for it, without impacting your credit score.

If you’re worried about your credit score, you might want to consider a credit building card to help improve it.

How do I compare?

You should check the details of any credit card deal carefully, so you know exactly how long any offer lasts and what the key terms and conditions are.

You might also want to consider other types of credit cards, including those that offer cashback and rewards. Why not start a comparison with us, to help you find the card that suits your needs?

How do I start a comparison?

To compare balance transfer and purchase cards with us, it helps to have some basic information to hand, including:

  • your annual salary and other income
  • the balance you’d like to transfer
  • your ideal monthly repayment
  • the transfer fee you’d be happy with.

We’ll ask you some questions to make sure we have all the information we need, then we’ll provide you with a list of suitable cards to choose from.

Anelda Knoesen

From the Money team

“A combined balance transfer and purchase credit card can be an effective way to reduce your debt and manage your spending on one single card. By using our credit card eligibility check, you can find out which cards you’re likely to be accepted for before you make your application – and it won’t harm your credit score.”

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**On average it can take less than 1 minutes to complete a credit card eligibility check through Compare the Market, based on data in September 2020.

***For the period 1st June 2020 to 31st August 2020, 10,731 people responded to the recommend question.  10,011 responded with a score of 6 or above, therefore 93.3% are likely to recommend.

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