If you’re new to the world of credit, the vast array of cards can be daunting, so we have put together this quick guide to interest free credit cards to explain the basics.

1. There are two main kinds of interest free credit card

The very first thing you need to know about interest free credit cards is that there are two kinds, 0% interest on purchases cards and 0% interest on balance transfer cards.

With a 0% interest on purchases card you don’t pay any interest on your purchases for a limited time, normally 6-12 months, but can be as much as 15 months, depending on your provider.

If you choose a 0% on balance transfers card you don’t pay any interest on balance transfers you make for a limited time, but you are normally charged an initial fee of around 3%.

2. What are the benefits of an interest free credit card?

0% on purchases:

– You can stagger the repayment of large purchases

– Any purchases between 100 and 30,000 pounds are covered by Section 75 of the Consumer Credit Act. If the product is faulty, or the company can’t deliver because they’ve gone bust, you can claim for a refund from the credit company

– The previous point also applies when you go abroad

– If your credit card is stolen, normally you’re only liable for the first 50 pounds spent by the fraudster

– Some companies offer rewards when you spend on your card

0% on balance transfers:

– Your debt won’t rise any further as it stops accruing interest

– You can pay off your debt faster, because your repayments aren’t being swallowed by interest

3. What are the cons of an interest free credit card?

0% on purchases card:

– Once your interest free period is over, the charges are likely to rise sharply

– It’s easy to fall into the trap of overspending when the balance doesn’t have to be paid back for a year

– If you don’t make the minimum repayment each month you’ll be fined, your credit score may be affected and you might even lose your 0% deal

0% balance transfer card:

– You will initially be charged around 3% of your balance, as a balance transfer fee. This is to discourage borrowers from jumping from one 0% interest lender to another

– As with a 0% interest purchase card, after the interest free period you will be charged a much higher rate and failing to pay your monthly repayments can have very serious consequences

– If you purchase anything on your 0% interest balance transfer card you may be hit with a high interest rate

– Transferring your balance too many times can lead to a poor credit rating, as credit companies do not see you as profitable

4. When should you use an interest free credit card?

0% on purchases credit card:

– If you’re making a big purchase that you are sure you can afford to pay off within the interest free period

– If your purchase is between 100 and 30,000 pounds, so that it is protected by the Consumer Credit Act

– If you’re going abroad (check the overseas charges for your individual card) so you’re protected against loss, theft or fraud

0% balance transfer credit card:

– You have debt on an existing credit card which is charged at a high interest rate

– You want to pay off your debt as quickly as possible, without accruing any more interest

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Category: Finance/Credit
Keywords: Interest free credit card, interest free credit cards, 0% interest, balance transfer