Who doesn’t love a 0% credit card?
No interest on your spending – check.
No interest on the money you move over from another card – check.
No worries… well not quite.
The 0% card can be a great option if you’re being stung by a large APR on your current card and watching your balance ratchet up, even when you’re paying off the minimum every month.
And there are a lot out there to choose from with banks, supermarkets and new credit card companies springing up all of the time.
The key, of course, to making a 0% credit card work for you and not the credit card company, is paying off the balance by the end of the 0% period.
People often do this by transferring the balance to yet another new 0% credit card, staying one stop ahead of the lenders.
This can great if you’re on top of things, but not quite so easy for the time-poor majority of people who just want a straightforward solution they’ll often then forget about for a few months.
And it’s not quite as simple as it seems. There are a lot of pitfalls to be aware of.
- Transferring a balance will incur a fee, usually a percentage of the overall debt – make sure you understand how much that will be
- Credit cards will expect a minimum balance repayment – make sure that’s not more than you can afford (it could even be higher than your existing card)
- One missed payment will usually see the 0% offer whipped away overnight – so always set up a direct debit
- Forgetting or getting mixed up about the offer’s end date will see interest shoot up immediately, from 0% to around 20% typically – so get the date in the diary and make sure you have a plan in place months in advance
- Shopping around is good in theory but each application results in a credit check, so any refusals will be a mark on your credit score
- And you may not be able to move to a new card as easily as you think, and could get stuck on the 0% card after the interest rate goes up.
Did you know that most lenders won’t let you move to another card within the same group, for example HSBC, John Lewis, M&S and First Direct, or Virgin, Clydesdale and Yorkshire Bank.
This is catching out more people than you’d think, who are finding themselves unable to find a new 0% rate with a different lender at the end of the offer, and having to fork out for the new higher interest rate.
Another option to reduce repayments and clear a high-interest loan – such as a credit card – is of course a credit union loan. The typical APR for a loan of £5,500 to £10,000 with CLEVR Money is 9.5% compared with the typical credit card APR of 20%. And our typical £10-15,000 loan is down to 6.9% APR.
A CLEVR Money loan will pay off your existing credit card and set up an affordable repayment plan with a direct debit, which you can then forget about safe in the knowledge there are no hidden fees or penalties.
We’re not looking to make a profit from you, and we can’t switch interest rates on you. We don’t hide fees and penalties in the small print, and we don’t want to see your debt increase.
We will speak to you directly to set up the loan and repayments, making sure you know exactly what will be going out each month and when it will be paid off.
You can apply online and one of our team will contact you to go through things. It’s a few minutes of your time for a lot of peace of mind.
Our loans might not be 0% interest but we’re hoping we can make them 100% stress free.
*Representative example. Borrowing £6,000 over 48 months will require repayments of £149.62 per month. Total amount repayable is £7,181.76 which includes interest at 9.5% Representative APR, Annual interest rate (fixed) 9.1%
The figures given above are for illustrative purposes only. The actual interest rates and repayment amounts may vary subject to loan amount and status.