Credit cards can provide convenience and a safer alternative to cash. They can also be entirely free of interest when used in the right way. It is even possible to profit if you are financially savvy enough. Here we explain how you can avoid paying interest on your credit card, list the best interest-free credit cards and low interest credit cards in the UK and explain how ‘stoozing’ works.
Interest free credit cards – 0% purchase cards and 0% balance transfer cards
0 interest credit cards fall under one of two categories – those that offer 0% on a balance transfer and those that offer 0% on purchases. Here is an overview of each:
Credit card 0 interest – 0% on balance transfers
Balance transfer credit cards offer 0% over a set period on a balance transferred from another credit card. The advantage of this form of card is saving on the interest you would have otherwise paid. There is, however, usually a percentage fee for making a transfer up to a certain cap.
You transfer a balance of £5000 from a card with 20% APR, with a transfer fee of 3% (up to a maximum of £75). Owing to the cap, you pay a fee of £75, rather than £150. Over the course of 24 months, you would make a saving of £2,000 in interest.
How to do a credit card balance transfer
- Make a list of all of your current credit cards, along with their balances and interest rates.
- Make sure you understand what the penalties are for missing a minimum monthly payment on the new card you are considering, as you will still need to pay this despite the 0% period. What’s more, your interest free privilege may be removed if you miss a repayment, leaving you to pay a default % fee that could well be higher than the interest rate you were originally paying.
- Understand exactly when the promotion ends and what happens next – should you not be able to repay the balance in its entirety you will either need to pay interest or undertake another balance transfer.
- Make a note of how long a period the 0% balance transfer promotion is available following the opening of the account.
- Choose how much to transfer – your chosen credit card will have a set limit as to how much your transferred balance can account for. For example, Tesco credit cards allow for 95% of your new limit – so if this was £1000, you could transfer £950.
- Open the credit card account and take down the details
- Provide your old credit card provider with the details as to where the balance should be sent
- Await the transfer – this takes between 2 to 10 working days.
Credit card 0 interest – 0% purchase
0% purchase APR cards will allow you to make purchases free from interest for a specific time – generally, this is between 12 and 21 months. Following this initial term, the remaining balance will be subject to the regular APR – so it is important to check what this rate is prior to opening the credit card account. It is also essential that you understand that other forms of transactions are not interest free, such as balance transfers and cash advances.
What are the best credit cards to consider?
You may plan on repaying your balance in full each and every month. Yet unexpected financial emergencies happen, bigger bills occur, life can cause emergencies. Even with the best will in the world, you may find that at least on some months, you are unable to clear your credit card balance. For this reason, it is advisable that you choose low interest credit cards.
Best low interest credit cards – For balance transfers
The following credit cards with 0 interest offer 0% on balance transfers…
|Credit card||Balance transfers||Balance transfer fee||Representative APR||Pay the balance over|
|Barclaycard Platinum with Balance Transfer||0% for 25 months||No fee||19.9%||19 months with no fees or interest|
|Sainsbury’s Bank No Balance Transfer Fee Credit Card||0% for 28 months||No fee||18.9%||19 months with no fees or interest|
|Virgin Money Balance Transfer Credit Card||0% for 24 months||No fee||19.9%||19 months with no fees or interest|
|Lloyds Bank Platinum Balance Transfer||0% for 25 months||No fee||19.9%||19 months with no fees or interest|
|Bank of Scotland Platinum Balance Transfer Card||0% for 25 months||No fee||19.9%||19 months with no fees or interest|
|TSB Platinum Balance Transfer Card||0% for 28 months||No fee||18.9%||19 months with no fees or interest|
Best low interest credit cards – For purchases
The following credit cards with 0 interest offer 0% on purchases…
|Credit card||Purchases||Pay the balance over||Representative APR (variable)|
|Barclaycard Platinum with Balance Transfer (25/25)||0% for 25 months||19 months with no fees or interest||19.9% APR|
|Sainsbury’s Bank Purchase Credit Card||0% for 31 months||19 months with no fees or interest||18.9% APR|
|Virgin Money All Round Credit Card (25m)||0% for 25 months||19 months with no fees or interest||18.9% APR|
|Post Office Money Matched Card||0% for 30 months||19 months with no fees or interest||18.9% APR|
‘Stoozing’ – Making money with your low interest credit cards
Known as stoozing, there is actually a way to profit from a credit card. However, stoozing does involve a stringent step-by-step process. Here is how it works…
- Open a savings account that pays a high AER interest rate
- Open a 0% purchase credit card – this type of card allows you to purchase goods and services on credit, with no interest charges
- Use the card from month to month for your day-to-day purchases as set out in your budget
- Deposit the cash that you would have spent on these outgoings into your high interest savings account
- As soon as the 0% interest period expires, use the saved money to repay the balance. You then get to keep the interest earned on the money while it was sat in the savings account
You borrow £1200 over a 24-month period on a 0% purchase card. You save the £1200 in a 3% interest account. At the end of 24 months, you will have earned approx. £72.