Now is the time to get a 0% credit card!

If you're paying a high rate of interest on your credit card, now's the time to do something about it!

At some point in our lives, most of us will use a credit card. After all, credit cards can be extremely useful bits of plastic to have in our wallets, particularly when you need to make a large purchase, such as a holiday. What's more, they can also be a great way to earn rewards – perhaps through cashback or airmiles.

But while the benefits of using a credit card can be good, they can also work out to be a very expensive way of borrowing money if you don’t use your credit card correctly.

In fact, recent research from Moneyfacts has revealed that the average credit card interest rate now stands at a whopping 18.7%! What’s more, Barclaycard, Capital One Bank, Egg, MBNA Europe Bank and Sygma Bank have all increased their interest rates since the start of the year. Outrageous!

On the plus side, however, the research also revealed that competition is returning to the credit card market. In the past year, the number of cards offering 0% interest on new purchases for at least 10 months has increased by 450%, while the number offering 0% on balance transfers for at least 10 months has gone up by 20%.

So what does this mean for you? Well, quite simply it means that if you’re paying a lot of interest on your credit card, or your interest rate has increased over the past year, there's absolutely no reason to put up with it! Get switching to an interest-free deal - now!

The best cards for spending

If you’re after a credit card for spending, you might be wondering what your options are. The chart below highlights some of the best deals on the market right now:

So, as you can see, there’s plenty of choice! Why pay an interest rate of 18.7% when all of the credit cards above are interest-free for between 10 and 12 months?

Personally, I think the Sainsbury’s Finance MasterCard for Nectar Card Holders is a great option. As well as offering a market-leading interest-free purchases period for 12 months, it also offers 12 months interest-free on balance transfers and therefore neatly side-steps that nasty trick known as negative order of payment.

So this means you can spend on the card and also transfer a balance across, knowing that both debts will be treated exactly the same.

The downside to this card, however, is that you will need a Nectar card to apply.

Although this is easy to apply for, if you don’t regularly shop in Sainsbury’s, you might prefer the Tesco Bank Clubcard MasterCard instead. This also offers an interest-free period for 12 months on all purchases, but with this card you’ll also earn Clubcard points for spending. Just don't use this card for balance transfers as well as spending, because the Tesco card operates negative order of payment.

The best cards for balance transfers

So that’s your spending sorted. But if you're only looking to transfer a balance, are there any better options? The chart below highlights some of the top 0% balance transfer credit cards:

As you can see, the top 0% balance transfer credit cards are the Yorkshire Bank Gold and Clydesdale Bank Gold Cards which offer 16 months interest-free on all balance transfers. However, you can only apply for these cards online if you’re an existing customer. If not, you will need to apply in branch.

As a result, you might prefer to opt for the Barclaycard Platinum with 15 Month BT Visa, NatWest Platinum Credit Card MasterCard or the RBS Platinum Credit Card MasterCard – all of which offer 0% on balance transfers for 15 months – only one month less than the Yorkshire and Clydesdale cards.

Bear in mind that you should only use your card for balance transfers – if you spend on it as well, you’ll be hit by negative order of payment.

Related goal

Pay off credit card debts

How to destroy your credit card debt quickly and effectively.

Do this goal

The longer term

Of course, while having a 0% credit card can come in very handy, there is one drawback. And that’s the fact that you will need to ensure you pay off the balance in full by the time the interest-free period comes to an end. If you don’t, you’ll get hit by a hefty interest rate.

If you really won’t be able to pay off your bill in full before the 0% deal comes to an end, you have two choices. The first is to transfer your debt to another 0% balance transfer credit card. And the second is to use a credit card with a long-term deal.

If the second option sounds more appealing, the MBNA Platinum Credit Card Visa offers an interest rate of 5.9% on all balance transfers until they are paid off in full (2% transfer fee). This offer is also valid on money transfers (4% fee) which means you can transfer money from your credit card into your current account. You can then put this cash towards your overdraft or loan and still enjoy the same 0% interest rate you would on standard balance transfers.

Just bear in mind that the low interest rate is not valid for purchases. So if you want to spend on your credit card, a better option might be the MBNA Platinum Low Rate American Express which offers 6.7% on all balance transfers (3% fee) and purchases, as well as 6.7% on money transfers (4% fee).

However, American Express isn’t accepted everywhere, so if that’s an issue you’re worried about, you could also consider the Barclaycard Platinum Simplicity Visa which offers 6.8% on all purchases and balance transfers. What’s more, you won’t have to pay a balance transfer fee with this card! You will also be able to take part in the Barclaycard Freedom scheme with this card, so you will automatically earn Reward Money as you shop.

So as you can see, there are some great low interest credit cards out there! So whatever you do, make sure you don’t get caught out by interest rates of around 18.7% when you could easily be paying a lot lot less!

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