Most people don't know the credit card fact that could save them a packet. Do you?
If you’re about to choose a new credit card, you’ve probably got certain priorities in mind. Perhaps you’re looking for a card with a great 0% balance transfer deal, or one with juicy cashback benefits?
However, in amongst those well-publicised incentives, there’s another benefit most of us aren’t aware of: The interest-free period that a card offers.
By this, I don’t mean the one-off, 0% promotional offers that many cards now come with.
I’m referring to the fact that most cards actually allow you several weeks of interest-free credit anyway, before you start paying interest on your balance.
A useful perk, eh? Nonetheless, according to a recent personal finance ‘literacy’ study by Santander, 88% of people still don’t know about it.
Play your cards right
It’s worth bearing in mind, however, that not all credit cards have been created equal when it comes to interest-free periods.
A couple still don’t offer any interest-free period at all, while at the other end of the scale, you could bag yourself 59 days of interest-free spending if you play your cards right.
Interest from day one
Here are the two cards I’ve found that charge you interest from day one:
|
Credit |
Interest-free period |
Typical |
Extras |
|
First Trust |
0 days |
14.9% |
None |
|
Lloyds TSB Advance MasterCard |
0 days |
11.9% |
0% on new purchases |
Although both these cards do have relatively low typical APRs, I wouldn’t go for either of them myself.
The lack of an interest-free period is a real turn-off for me, and I think there are better deals on the market for those who can’t clear their balance in full every month.
For example, the Barclaycard Simplicity Visa Card currently has a typical APR of just 6.8%, which applies to every purchase or balance transfer made.
And once you’ve got to the stage where you can clear your balance every month, it also offers a substantial 56 day interest-free period on purchases.
59 days grace
At the other end of the scale, dozens of cards offer interest-free periods which are over 55 days long - several as long as 59 days.
You’re being given a month (maximum 31 days) plus a further 28 days to clear your balance.
So in other words, you have an extra ‘cushion’ of time to fall back on if you don’t manage to clear your balance, on the dot, at the end of every month.
Horses for courses
So how do you decide which one is right for you? In a nutshell, you need to get your priorities straight and find the card that best suits your circumstances.
For example, if you want to use your plastic abroad, the following cards might suit you down to the ground:
- The Santander Zero card (18.9% APR)
- The Halifax Clarity card (12.9% APR)
- The Saga Over 50s Platinum Visa card (11.9% APR)
- Any card from The Post Office, including its Platinum card (16.9% APR)
Until most other card providers, none of these charge you any fees to use your card abroad. And you’ll still get a decent interest-free period of 56 days.
This is also true of the new Sainsbury’s Gold Credit card, but you will have to pay a £5 monthly fee to use this card, so I don’t recommend it.
On the other hand, if your top priority is a long interest-free deal so you can pay off existing credit card debt, the best card available is the Barclaycard Platinum card, which charges 0% on balance transfers for 16 months, with a 2.9% fee. The rate rises to 16.9% after 16 months, so make plans to either switch or pay off your balance in full by then.
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Alternatively, if you want a long interest-free deal on purchases, the best card on the market is the Tesco Clubcard Credit Card, which charges 0% on purchases for 13 months.
On the other hand, if you’re looking for a long combined 0% deal - you may prefer the Sainsbury’s Finance Mastercard for Nectar Cardholders.
In this case, the 0% new purchase and balance transfer deals both run for 12 months (a 3% balance transfer fee applies). After that a typical APR of 15.9% applies.
A final word of warning
Whichever credit card you choose, remember to read the small print.
Certain transactions (like cash advances) are usually not afforded the interest-free ‘grace’ period given to purchases. So don’t get caught out!
More: Something you need to know about your credit card | Win rewards for spending interest-free