Used correctly, a credit card can be a handy tool to help manage your finances, but with so many different types of credit card it is important to choose the right one for your needs. If you are looking to reduce the amount of interest you are currently paying on existing cards, or you are planning a large purchase, an interest-free or 0% APR credit card could be a good option.
APR stands for annual percentage rate and a 0% APR credit card allows you to avoid paying interest on balance transfers or purchases or both for a set amount of time. We explain APR in more detail in our article 'Interest rates explained'.
What is the difference between a 0% purchase and 0% balance transfer credit card?
A 0% purchase credit card allows you to spread the cost of your spending interest-free over a set number of months. This can provide some breathing space if you have a large purchase to pay for, such as a holiday. You can pay off the amount you owe in monthly instalments without paying interest on top. Once the 0% deal ends you will start paying interest, unless you have cleared your balance. Interest may also still be charged on cash withdrawals, balance transfers and transactions made abroad.
A 0% balance transfer credit card, on the other hand, allows you to transfer one or more credit card balances across and avoid paying interest on your new card for a number of months. If you were paying interest on your old balances, this process can save you a decent sum of money. The downside is you will often have to pay a transfer fee which is added to your new balance. Some credit cards offer shorter 0% periods in return for a lower transfer fee, so it can be worth weighing up how long you need to pay off your debt to see which is the cheaper option for you.
Once the 0% deal ends, you will start paying interest on your new card, unless you have paid off the balance in full or you carry out another balance transfer. Many balance transfer 0% deals also only apply to transfers carried out in a certain period of time, ie. 60 days, so check this before you apply. It is also best to avoid spending on a balance transfer card, although some credit card companies offer a dual credit card with a 0% interest rate for both balance transfers and spending.
Purchase credit cards
A 0% purchase credit card charges no interest on new spending for an initial period of time. But how do you know if a 0% purchase card is right for you? If you are planning a big purchase and cannot afford to pay for it upfront, a 0% purchase card allows you to spread your payments over several months, without worrying about interest building up.
If you are thinking of applying for a 0% purchase card, be aware that the best deals are only offered to those borrowers who have excellent credit ratings. If your credit rating is below par, you may not be offered the interest-free period advertised, or your application could be rejected. It is therefore worth checking your finances are in order before you apply. If your application is accepted, make sure you keep up with your monthly repayments and aim to clear your balance before the end of the interest-free deal.
You can find more information on purchase credit cards in our article 'Compare the best 0% purchase credit cards'.
Compare the best 0% purchase credit cards
The table below shows the top three deals for 0% purchase credit cards:
|Provider||Interest-free period||APR (after interest-free period)||Rewards||Minimum repayment|
|M&S||Up to 20 months||19.90%||1 point per £1 spent at M&S and 1 point per £5 spent elsewhere. Points can be redeemed four times per year||Greater of 1% of balance plus interest, 2.5% or £5|
|Sainsbury’s Bank *||Up to 20 months||20.95%||Collect Nectar points on purchases (must have had a Nectar card for at least 6 months to apply)||Greater of 1% of balance plus interest, £5 or 2.25% of balance|
|TSB||Up to 20 months||19.95%||N/A||Greater of 1% of balance plus interest or £5|
*You need to have had a Nectar card for at least 6 months to apply
- 0% on new purchases for up to 20 months, depending on your circumstances.
- 0% interest for up to 20 months on balance transfers made within the first 90 days of account opening
- 2.90% fee for balance (minimum of £5)
- Interest rate of 19.90% after interest-free period
- 0% on new purchases for up to 20 months. Depending on your circumstances, you may be offered 16 or 12 months
- 0% interest on balance transfers for up to 20 months. Depending on your circumstances, you may be offered 16 or 12 months
- Collect Nectar points as you spend (You need to have had a Nectar card for at least 6 months to apply)
- Sainsbury's isn't currently accepting applications from those that are self-employed
- 3% fee (minimum £3) for balance transfers
- Interest rate of 20.95% APR after interest-free period
- 0% interest on new purchases for a maximum of 20 months depending on personal circumstances, interest currently 19.95%
- 0% interest on balance transfers for up to 20 months
- 0% only applies to purchases and transfers made in the first 90 days of account opening.
- No annual fee
- No interest will be charged on new purchases if you pay the statement balance in full and before the end of the offer period. If not repaid in full, interest will be charged from the date of purchase until date of full repayment.
Best 0% balance transfer cards
A 0% balance transfer credit card allows you to move existing card balances across and avoid paying interest for a set time. But how do you know if a 0% balance transfer card is right for you? If you are paying interest on existing credit card debt, you can save money on interest and pay off your balance more quickly if you use a 0% balance transfer card.
However, as with 0% purchase cards, only those with good credit ratings will be offered the best balance transfer deals. If your credit rating is low, you may be offered a shorter interest-free period, a higher transfer fee, or your application could be rejected.
For more information on balance transfer cards take a look at our articles:
Compare the best 0% balance transfer credit cards
The table below shows our top three deals on 0% balance transfer cards:
|Card||0% reward period||Handling fee||Smallprint||Minimum Repayment||APR||Good For|
|TSB||29 months||2.95%||May be offered either 25 or 22 months interest-free instead of 28||1% of balance plus any interest or £5, whichever the greatest||19.95%||
Those wanting the longest interest-free period
|M&S Bank||28 months||2.85%||If accepted, you should get the full 28 months||1% of balance plus any interest, 2.5% of balance or £5, whichever the greatest||19.90%||
Those wanting additional rewards (You get bonus M&S points every time you spend at
|HSBC||25 months||1.50%||If accepted, you should get the full 25 months||1% of balance plus any interest, 2.5% of balance or £5, whichever the greatest||21.90%||
Those wishing to pay a lower handling fee
- 2.95% fee on balance transfers
- 0% interest up to 29 months for balance transfers
- Time limit - must transfer a balance within 90 days to get the 0% offer
- No minimum income required
- Minimum repayment - 1% of balance plus interest or £5, whichever the greatest
- Representative APR 19.95%
- 2.85% fee on balance transfers
- 0% interest up to 28 months for balance transfers
- Time limit - must transfer a balance within 90 days to get the 0% offer
- No minimum income required
- Minimum repayment - 1% of balance plus any interest, 2.5% of balance or £5, whichever the greatest
- Representative APR 19.90%
- 1.5% on balance transfers
- 0% interest up to 25 months for balance transfers
- Time limit - must transfer a balance within 60 days to get the 0% offer
- Minimum income required: £6,800
- Minimum repayment - 1% of balance plus interest, 2.5% of balance or £5, whichever is greatest
- Representative APR 21.90%
How much money can I save with interest-free credit cards?
To work out how much you could potentially save with an interest-free credit card, let’s imagine you have a debt of £3,000 on an existing card charging 19.9% APR.
The table below shows how much it would cost by leaving the debt on your existing card, versus transferring it to a 0% balance transfer card. We’ve used two different balance transfer cards with different fee amounts. We used the Money Advice Service calculator to work this out.
Comparing a 19.9% APR credit card with ones that charge 0% - How much can you save?
|Card||Interest rate||Fee (if applicable)||Monthly payment||Total cost in interest and fees||Total saving vs standard card||Time taken to pay off|
|Existing standard card||19.90%||n/a||£150||£605||n/a||25 months|
|Virgin Money 0% balance transfer card||0% for 22 months||3% (£90 on a £3,000 transfer)||£150||£90||£515||21 months|
|NatWest 0% balance transfer card||0% for 20 months||0%||£150||£0||£605||20 months|
In the example above, the NatWest card saves you the most money, but if you have a larger balance and you need longer to pay it off, the Virgin card could be a better choice.
Can I get a 0% credit card?
If you want to know how to improve your chances of getting a 0% credit card, the key is having a good credit score. There are a number of steps you can take to improve your credit score, including:
- Registering on the electoral roll - this confirms to lenders you live where you say you do
- Checking your credit file regularly and correcting any mistakes
- Paying your bills on time - it is a good idea to set up a direct debit for regular payments
- Spacing out applications for credit - too many applications in a short amount of time can make you look desperate for credit
- Considering a credit building credit card if you do not qualify for mainstream cards - full details can be found in our article “Compare the best credit cards if you have bad credit”.
Things to consider before getting a 0% credit card
Before applying for a 0% credit card, you should think about your options carefully. It is worth considering:
- What do you need the credit for? If it is for a large purchase, is this something you could live without?
- If you are applying for a 0% balance transfer card, do you know what the transfer fee is? Could you save money with a shorter 0% deal but lower fee?
- Will you be able to afford the monthly repayments? Keep in mind the minimum monthly repayment set by your provider is likely to be low - it is always best to pay more than that if you can
- Do you know how much interest you’ll be charged at the end of the 0% period and do you have a plan in place for when that happens?
- Have you checked your credit score? A good score means you are more likely to be accepted for the top deals.
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