Interest Free Credit Cards

Interest free or 0% credit cards are great products for banks and other credit card providers to attract new customers.

Interest free or 0% credit cards are great products for banks and other credit card providers to attract new customers. For consumers, these credit card options are good ways of helping to control debt by limiting the amount of interest paid. Credit card providers offer zero-interest options for new applicants for a specific period, typically nine months or longer.


How it Works


The first bank to offer a zero-interest credit card product in the United Kingdom was Capital One during the 1990s. Interest free credit cards allow customers to have a longer period to settle debts without incurring any interest. When signing up for an zero-interest credit card, you will not pay interest for a set period of time. The interest free period varies depending on the card and the provider. Typical terms are 12 or 24 months, although longer periods of up to 34 months are also offered. Credit card holders can also switch to new providers at the end of an interest free period and benefit from another interest free credit card offer from another provider. This further extends the ability of the cardholder to manage their debt and save money by avoiding interest fees.


Who's Eligible


Interest free credit cards are typically introductory offers available from banks and other firms that provide credit cards. They are generally restricted to only new applicants. These attractive offers are ways for credit card providers to attract new customers.


Qualifying for an interest free credit card is no different than applying for a regular credit card. Having a good credit rating and income are two of the main considerations a credit card provider will take into account when reviewing an application. If an applicant has a history of bad credit or has been declined for multiple credit card applications, they may not be eligible. Like a regular credit card, an interest free card will include credit limits that are often based on the applicant's income.


Choosing an Interest Free Credit Card


When considering an interest free credit card, always look at the fine print. Restrictions and conditions vary depending on the credit card provider. Zero-interest offers are often complex and it is up to the cardholder to understand all the terms and conditions. Some interest-free credit card providers may require a high monthly income in order to be eligible. Terms might include the requirements to pay off the sub-balance by a specific date or have interest charged retroactively. Certain offers might require the cardholder to pay a minimum monthly amount that is interest free.


Certain credit card providers may charge fees for zero-interest cards, including charges for transferring debt from one credit card to another. Balance transfer fees can be considerable, particularly for customers with a high amount on their cards. For example, a two per cent balance transfer fee on £10,000 results in a £200 charge to the credit cardholder. Credit card providers may also impose penalties for missing a payment, including applying a fee or revoking the zero-percent promotional rate.


Important Info


When choosing an interest free credit card, always check that the provider is authorised by the Financial Conduct Authority, which is the regulatory body for financial firms in the UK. The FCA regulates over 50,000 firms that provide credit, loan and debt services. Any firm that offers consumer credit must be regulated and authorised by the FCA.


There are a number of resources to help find interest free credit cards, including Money.co.uk, MoneyNet and MoneySuperMarket.com. These resources provide information on interest free credit cards as well as comparison tables.


Resources


Financial Conduct Authority
Find Credit Card Providers



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