If you have some serious spending on the horizon, which plastic friends should you turn to?
Many of us use credit cards in order to accrue points or build up rewards from our loyalty scheme of choice. Perhaps you collect Nectar points, in order to get money off your shopping, or make use of a cashback credit card, so that your spending is rewarded at the end of the year with a nice cheque.
And these cards are great, so long as you pay off your balance in full each month. But what about if you have a big purchase on the horizon, a wedding, holiday or baby on the way? Which cards are best to cover these larger costs?
0% purchase cards
When I was planning my wedding, there were quite a few large costs to cover, so it didn't take me long to decide to sign up for a 0% purchase card.
As the name suggests, these are cards which will not charge you any interest on the purchases you make for a specified period of time. So I could pay for the groomsman’s suits, the church and everything else, and only have to pay off that debt in stages, making it all far more manageable.
Back then, the Tesco Clubcard credit card was far and away the best card in the market, offering 12 months at 0% interest. To have a full year in which to pay off the debt was fantastic. Now, nearly two years on, the great news for borrowers is that the 0% purchase cards around today are even better!
Here’s the top ten:
|
Card |
0% period |
|
15 months |
|
|
15 months |
|
|
14 months |
|
|
13 months |
|
|
13 months |
|
|
13 months |
|
|
13 months |
|
|
13 months |
|
|
13 months |
|
|
12 months |
*Only available to new and existing current account holders
As you can see, nine of the ten cards above offer an even longer period than the best card a couple of years ago, a great state of affairs for those of you with a big purchase ahead!
I need more time!
Now, 12 months was more than enough time for me to wipe out my debt, but in truth I had only spent fairly modest sums. If I had spent £5,000 plus, I know that I might have struggled to clear the balance before the end of my 0% period.
That’s where your second option comes in – the balance transfer card. These are cards which will offer a 0% interest period on the credit card debt that you transfer over onto this new card. It’s a good option for borrowers who haven’t quite cleared their debt after using a 0% on purchases card, or for those who want to make their big purchase on an existing credit card, and then simply move that balance over.
0% balance transfer cards
This is another area which has seen the deals on offer improve substantially from just a couple of years ago. Back then, Virgin was head and shoulders above the rest in the balance transfer market, offering 16 months' free from interest.
Just a couple of weeks ago, you could instead nab a card offering a frankly unbelievable TWO YEARS before you had to pay any interest! And while that card has sadly now been withdrawn, there are still plenty of deals offering a seriously long period free of interest in which you can pay off your debt.
Check out the top ten balance transfer cards:
|
Card |
0% period |
Balance transfer fee |
|
22 months |
2.9% |
|
|
22 months |
3.5% |
|
|
20 months |
2.6% |
|
|
19 months |
2.85% |
|
|
18 months |
3% |
|
|
18 months |
2.75% |
|
|
18 months |
2.8% |
|
|
18 months |
2.8% |
|
|
17 months |
2.9% |
|
|
17 months |
3% |
Once again, borrowers have a considerable range of cards to choose from, giving them plenty of time to pay off their debt in more manageable chunks.
Just remember these cards are only interest-free for debts that you transfer over from another card - so for purchases you have already made. So don't use them for new purchases. Spend on another card and transfer over that debt.
Remember the fee
Finally, a word of warning: don’t get caught up simply focusing on the 0% period on offer – just as important is the fee you’ll be charged. For example, the top two cards each offer 22 months of 0% interest. However, there is a significant difference of 0.6% between the fees being charged.
On a £5,000 balance transfer, that’s the difference between a £145 fee (with the Barclaycard) and a £175 fee (on the Halifax card). And that difference is even more pronounced if you are unlikely to need the full 22 months to pay off that balance – if you reckon you could shift it in 20 months, going for the plain Barclaycard would mean a fee of just £130.