What are Interest Free Credit Cards?

If you’re thinking of making a large purchase on a credit card, such as new home furniture or a holiday, you can end up paying more than you expected as monthly interest is charged on top of the initial cost. One way to avoid this is to use an interest free credit card (sometimes called a 0% purchase card) which allows you to concentrate on paying off your bills and spending more of your money on things you need, rather than also dealing with accumulating interest.

How do Interest Free Credit Cards work?

Interest free credit cards are ideal if you’re aiming to make a large purchase immediately and pay the balance off slowly over time. Other credit cards will carry a purchase rate – the rate of interest applied to new items bought with the card. With interest free credit cards, you aren’t charged interest on new purchases for a limited time. For example:

  • Let’s say you make pay for one £500 item with an interest free card, and another £500 item on a card with a purchase rate of 20%.
  • You receive your monthly bills for your cards and pay half of their balances, leaving £250 on both of your cards.
  • The next month, your new interest free card bill will be for £250, but your regular credit card bill will be for £300 because it has charged 20% interest on top of your existing £250 balance.

You apply for interest free credit cards as you would any other type of card and the success of your application depends on passing a credit check. You’ll need a good credit score to be applicable for the best deals, so use our free credit report to get a quick overview of your finances.

How long does the 0% Interest Period last?

The duration of each card’s interest free period varies depending on the card provider and can last anywhere between one month or multiple years. It is also dependant on you staying within your card’s credit limit, and exceeding your limit will mean you are charged interest on further purchases you make. When applying for a card, consider any long-term payments you’d like to make with it and look for one that offers 0% interest for a similar amount of time.

While using an interest free credit card, you may be charged a small fee to make balance transfers (typically 1-5% of the total balance), though some providers offer partial or even full refunds on these if they’re made in your first few months of using the card.Different products carry different durations when it comes to offering reduced rates and refunds on charges. These will always be clearly identified during your application, though it can be difficult to remember when offers expire if you’re using your card for a long time. Keep all your documentation together and if you’re ever unsure about a charge, contact the provider to explain it to you.

What other advantages do they have?

Unlike debit cards, credit cards protect any purchases you make between £100 and £30,000 in case any products are faulty or you don’t receive what you paid for. This means even if a company goes out of business (such as an airline you’ve booked flights with), you can claim the money for your purchase back through the credit card issuer. You’re also protected if you become a victim of fraud, and any money stolen from you can be refunded.

Due to the sheer number of credit card providers, there is a wide variety of products available, each with different benefits and offers you can take advantage of. Always read what each product offers carefully so that you make the right choice for your financial plans.You can find all the best interest free credit cards through our special card comparison page.

Why do Interest Free Cards still show APR?

While these cards charge no interest on new purchases for several months, they will still have a set APR (annual percentage rate) for when this time expires. Typical APR on a purchase credit card is around 18%, so it’s important to plan ahead for when the no interest period of your card ends.

Learn more about anything from card types to interest rates and credit limits in our money advice section.

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