Compare interest free balance transfer & purchase credit cards

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What is a balance transfer and purchase credit card?

If you’re looking to cut down on existing debt, but also need a card for spending, there are two types of interest free credit card to consider:

  • 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.

But if you want the convenience of both features on a single credit card, then a balance transfer and purchase credit card could work for you.

A balance transfer and purchase credit card is also known as an ‘all-rounder’ credit card. It allows you to transfer debt and make purchases on a single card, while benefitting from a 0% interest free period for both balance transfers and purchases. Having just one card with two functions could help you keep a better track of your spending and debt management.

CORONAVIRUS UPDATE

We understand that the outbreak of coronavirus (COVID-19) has caused financial difficulty for some of you. If you have a credit card and you’re worried about making repayments due to coronavirus, we’re here to help you understand the options available. 

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How does the 0% balance transfer period work?

A 0% balance transfer period 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, you’ll have to pay interest on the amount you owe – typically 20-22%.

A balance transfer card lets you shift that debt to another card, with no interest to pay for a set period. The 0% interest free period on balance transfers can range from 6 to 24 months – or even up to 30 months for those with a squeaky-clean credit history.

Once the interest free period ends, you’ll be charged interest on any remaining balance. This is set by the provider and is typically around 20-22%, but can be as high as 35%. 

It’s important to remember that, at the very least, you’ll have to make the minimum monthly repayments. You should also aim to clear the outstanding amount before the 0% deal expires to avoid being charged interest.

Be aware that you can’t transfer a balance between two cards issued from the same bank or banking group – for example, from one Barclaycard to another.

How does the 0% purchase period work?

A 0% purchase period 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 for in one go.

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

As with balance transfers, once your 0% purchase period ends, you’ll be put on the APR set by your provider. Just be aware that on some all-rounder cards, the interest free period for balance transfers and purchases are different. For example, you may be offered 0% on balance transfers for 20 months, but only for 3 months on purchases.

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.

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

This depends on your financial circumstances. If your main 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 will have less of an impact on your credit score, as you only need to make one application to get both functions.

Just be aware that combined cards tend to have a higher transfer fee and, as we mentioned before, the 0% purchase period and the 0% balance transfer period might not be the same. If you take out an all-rounder card with different 0% periods, make sure you keep an eye out for when each one ends.

Compare the Market Limited acts as a credit broker, not a lender. To apply for a balance transfers and purchase credit card you must be a UK resident and aged 18 or over. Credit is subject to status and eligibility and is based on the credit card provider’s assessment of your individual circumstances.

How to get the cheapest balance transfer and purchase credit cards

One of the best ways to find the cheapest balance transfer and purchase credit cards is to shop around and compare different deals.

Look for a card that gives you the longest 0% period on both balance transfers and purchases. Ultimately, the cheapest card for you will be one that helps you manage your debt and spending the most effectively.

Just remember the golden rule:
Make sure you’re able to pay off the full balance before the balance transfer and purchase 0% period ends.

Frequently asked questions

What are the fees and charges for a balance transfer and purchase credit card?

Although you won’t have to pay interest on the repayments for a set period of time, you may be charged a transfer fee on your balance transfers – usually around 3% of the amount you’re transferring.

Before you take out a balance transfer and purchase credit card, make sure you’re aware of any fees or charges you might have to pay. Typical credit card charges include:

  • Late payment fees – if you don’t pay at least the minimum amount on time each month, you could be hit with a late payment fee.
  • Cash withdrawal fees – usually around 2-3% of the amount withdrawn.
  • Using your card abroad – most providers charge a commission fee if you use your credit card abroad. If you use your card to withdraw cash abroad, you might also be charged a foreign transaction fee as well as the cash advance fee.

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 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 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.

Does representative APR mean I won’t get the best deal?

When looking at balance transfer and purchase credit card deals, you’ll see that each provider advertises a representative APR. This might not be the APR you’re offered.

Representative APRs advertised by credit card providers tend to be their best deals, which they only need to offer to 51% of their customers – typically those with the best credit rating.

The actual APR you’ll be offered depends on your personal circumstances and your own credit rating. If your credit history is less than perfect, don’t expect to be offered the best deal.

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 what your credit score is will give you an indication of which cards you’ll be eligible for. Alternatively, you can use our credit card eligibility checker 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.

Can I get a balance transfer and purchase credit card if I have bad credit?

It’s not impossible to get a balance transfer and purchase credit card if you have bad credit, but you might have fewer options. Credit card providers look at your credit score to see how you manage your finances and to assess whether you’ll be able to comfortably pay back what you owe. The lower your credit score, the higher your chances of being rejected.

If your application is accepted, it’s likely you’ll be offered a shorter interest free period and may be charged a higher balance transfer fee.

If you use your balance transfer and purchase credit card wisely, it could give you time to pay off your debt without added interest. But you need to be disciplined. Don’t let the interest free period tempt you into getting further into debt.

If you’re struggling with your finances, there are options for tackling credit card debt. You might also find it helpful to contact a debt counselling agency or charity, such as Citizens AdviceNational Debtline or StepChange Debt Charity.

What to avoid when using a 0% balance transfer and purchase credit card

  • Only making the minimum repayment each month – this is the very least you should pay, but sticking to the minimum means you’re unlikely to be able to pay off the full balance before the 0% period ends.
  • Forgetting when the 0% period for both balance transfers and purchases ends – it’s important to keep an eye on these, especially if they’re different. Make sure you know exactly what APR you’ll be charged once the 0% period ends and how much your debt will grow if you fail to pay back the full balance in time.
  • Not taking advantage of the entire offer period – if you have a six-month 0% period and you make a big purchase two months down the line, you’ll only have four months to pay back the balance without interest. It makes sense to make any major purchases as soon as you get your credit card so you can make the most of the 0% period.
  • Using the card to withdraw cash – balance transfers and purchases might be interest free for a certain period but using an ATM isn’t. Like most credit cards, you’ll usually be charged interest from the day you make a cash withdrawal until the cash advance is paid off. If you need to get money out, use your current account debit card instead.
  • Not making a balance transfer in time – in most cases, you need to make a balance transfer within the first 60 or 90 days of getting your card to be entitled to the 0% deal, otherwise you could be charged expensive interest at the normal rate. Make sure to check for any time limits before taking out the card. 

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 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 minute to complete a credit card eligibility check through Compare the Market based on data in January 2021.

***For the period 1st September to 30th November 2020, 12,477 people responded to the recommend question. 11,706 responded with a score of 6 or above, therefore 93.8% are likely to recommend.

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