What is a 0% interest purchase credit card and how does it work?
A 0% purchase credit card is similar to an ordinary credit card but there is no interest charged on purchases for an initial period of time set by the card provider. Interest, however, may still be charged on cash withdrawals, balance transfers and transaction made abroad.
The period within which no interest will be paid is set by the credit card provider, currently the maximum interest-free period available is 20 months. When applying for a 0% interest purchase credit card your financial circumstances will be assessed and this will determine whether you are offered the advertised interest-free period, a reduced period or if your application is rejected. It is important therefore to make sure you have your finances in order prior to making an application.
Be aware that credit card providers are not in the habit of lending you money for free. They are fully aware that most people do not pay off the full outstanding balance each month and so they are confident that they will be charging you interest in the long term. To avoid this, make sure you pay off your balance in full every month or prior to the end of the interest-free period.
Best 0% purchase credit card with longest interest-free period
- Best for: Those looking for the maximum time to pay the card off, interest free
- Representative APR: 21.9% variable
- Interest-free period: Up to 24 months, although some will only get 12 months
- Perks: £20 cashback when you spend £250 or more within 90 days of taking out the card
- Annual fee: No annual fee
- Why we like it: If you have a strong credit rating, you are likely to be able to secure the full 0% interest period, which is the best currently on the market
Best 0% purchase credit card with longest guaranteed interest-free period
- Best for: Those who shop in M&S, who will enjoy the rewards points
- Representative APR: 21.9% variable
- Interest-free period: 23 months
- Perks: Earn one rewards point for every £1 spent at M&S or £5 spent elsewhere
- Annual fee: No annual fee
- Why we like it: Unlike many cards, you will definitely be given the full 23 months if you are accepted for the card
Best 0% purchase credit card for those with good credit scores
- Best for: Those with strong credit scores, who will benefit from the full 23 months
- Representative APR: 20.9% variable
- Interest-free period: Up to 23 months, subject to status
- Perks: Collect Tesco Clubcard points
- Annual fee: No annual fee
- Why we like it: It has a market-leading interest-free period, although you may be offered 18 or 14 months, subject to status. However, you can also benefit from earning Tesco Clubcard points
Best 0% purchase credit card for cashback
- Best for: Those looking for a cashback bonus - it offers £25 if you spend £100 or more in the first 60 days
- Representative APR: 22.9% variable
- Interest-free period: 22 months
- Perks: Offers and discounts through HSBC's home&away scheme
- Annual fee: No annual fee
- Why we like it: If accepted, you are guaranteed to get the full 22 months, while also having the potential to earn cashback
Best 0% purchase credit card for rewards
- Best for: People who have had a Nectar card for at least 6 months
- Representative APR: 21.9% variable
- Interest-free period: Up to 23 months
- Perks: Get a bonus 750 Nectar points for every shop at Sainsbury's over £35 in the first two months, up to a maximum of 7,500 points. Then, get 2 points for every £1 spent at Sainsbury's and 1 point for every £5 spent elsewhere
- Annual fee: No annual fee
- Why we like it: If you regularly shop for groceries at Sainsbury's, it's a great way to earn extra Nectar points
Best 0% purchase credit card for bad credit
Capital One
- Best for: Those with poor credit who want the maximum amount of time off from paying interest
- Representative APR: 34.9% variable
- Interest-free period: 4 months
- Perks: n/a
- Annual fee: No annual fee
- Why we like it: Offers a relatively small credit limit initially, with the potential for two credit in the first year
Advantages of a 0% purchase credit card
0% credit cards can be very useful particularly when purchasing more expensive items such as a holiday or large items for your home. If you make sure that the balance is paid off in full before the interest-free period ends you can have access to free money for up to 20 months.
If you have an outstanding balance on an existing credit card, transferring the balance to a 0% credit card will allow you to clear the debt quicker as no interest will be charged for a period of time, although you will usually have to pay a fee of around 2.5%.
Things to consider before opening a 0% purchase credit card
Carefully consider your financial circumstances before applying for any credit card. Getting caught up in the excitement of a pending holiday or a new purchase can cloud your judgement and leave you struggling to clear the debt.
Although a 0% credit card will give you an interest-free period on purchases, it is vitally important that you clear the outstanding debt before the end of this period to avoid getting caught up in a debt spiral.
The advertised conditions, such as the interest-free period, are all subject to your personal circumstances and you may be offered less if your personal finances are not in good shape.
Any application will be subject to a credit score so make sure you check this prior to applying.
0% purchase credit card vs personal loan
0% credit cards are a flexible way of borrowing money over a short period as long as you clear the amount owed every month or within the interest-free period. However, there is a great temptation to keep using your credit card for small everyday purchases allowing the balance to grow over time, incurring high-interest charges.
Personal loans are a more structured way of borrowing money with a set repayment period and interest rate. Interest rates on loans tend to be lower than with credit cards but obviously with a 0% credit card you can take advantage of the interest-free period to clear your debt without incurring any interest charges.
For more information read our article: Is it better to get a credit card or a personal loan?
