What can you do with an interest-free credit card?
You can do the following things with an interest-free credit card:
- Make purchases or balance transfers from a high-interest credit card for a set period, without paying interest on the balance you move from another lender.
- Use it as a payment option if you need to make a big ticket purchase like a sofa or new dining table, and you don’t want to take a loan or store credit.
- Get the breathing space for bigger purchases with a 0% interest credit card will give without building additional interest for a set period.
Is an interest-free credit card the same as a balance transfer credit card?
It depends if it is just a purchase credit card with a 0% period, or if it is also a balance transfer credit card. A balance transfer credit card is designed to allow you to move balances from one place to another, whereas a 0% interest credit card may just offer a 0% purchase rate for a period of time.
This said, one of the main reasons people usually take an interest-free credit card is to do balance transfers so that they can benefit from not carrying an interest bearing debt. A 0% interest credit card will give you some breathing space to try and pay off debt from balance transfers without paying any interest.
Some lenders, but not all, will charge you a balance transfer fee.
What are the advantages and disadvantages of an interest-free credit card?
Before you apply for a 0% interest credit card, it helps to know some of the potential pros and cons.
As these cards feature 0% interest for a certain period, the actual borrowing can be interest free. If the card is used irresponsibly, this can lead to mounting debts and expensive repayments.
The 0% interest period can be useful if making large purchases. If you can repay the balance within the agreed interest-free period, you can spread the cost of your purchases.
Similarly, if you’re transferring a balance from a higher interest rate card to a 0% balance transfer card, by consolidating your existing debts you may find the monthly repayments are lower. There may be balance transfer fees which will need to be factored in when calculating your monthly repayments though.
When considering some of the cons of these types of cards, once the 0% period lapses, the card usually reverts to a much higher APR or interest rate. Being mindful of whether you can repay the balance within the 0% period is therefore something you should thoroughly consider before applying for this type of card.
Dependent on the terms and conditions, typically the 0% interest-free period (unless otherwise stated) only applies to purchases or balance transfers – not cash withdrawals. If the card holder withdraws cash, this could incur interest charges and additional fees.
How do I get the best out of an interest-free credit card?
Here are our top tips to get the best out of a 0% interest credit card:
If you want the flexibility of using an interest-free credit card to move existing, more expensive balances:
- Find out which providers offer interest-free credit cards, and what their rates are compared to your existing debt.
- Check your income and expenditure to work out if you would be able to pay off any balances you transfer within the interest-free period.
- If your calculations show you can, then you will make a long term saving by taking out an interest-free credit card.
- If your calculations show you could not, then you should see what balance would be left by the time your interest-free period ends to make sure you will still be saving in the long term – if the APR or interest on the new interest-free credit card is lower than on your existing card, chances are you will make a saving – but make sure you do your calculations carefully first.
- Once you’ve got your interest-free credit card and done your balance transfer, make sure you’ve set up a direct debit to get the balance paid off within the interest-free period, assuming your calculations show you can afford it.
If you want to use an interest-free credit card to make a big ticket purchase:
- Consider what is available from interest-free credit card providers, how long the interest-free period will be, and what the interest rate is once the interest-free period ends.
- Look at your income and expenditure to see if you could afford to pay off the purchase within the interest-free period.
- When you take out the interest-free credit card to make a big ticket purchase, make sure you get your direct debit set up to cover the amount you can afford to pay each month before the 0% period ends.
Can I get an interest-free credit card from 118 118 Money?
In order to get the interest-free period on new transactions, you need to pay off the statement balance, in full by the payment due date. For more details on how the interest-free period works, visit our credit card FAQs.