Best balance transfer and 0% purchase cards
Choosing the right card can be a difficult task but Moneywise has sifted through the plastic to find the very best credit cards to suit a variety of spending patterns.
Our weekly round-up contains all the best buys, putting you in charge of your money and letting you know how to get the most out of your plastic. Before you take the plunge however, it is worth thinking about what you want a credit card to do and what you want to use it for.
If you are going to spend large amounts, find a credit card offering 0% on purchases - ideally one with a long interest-free period that charges a reasonable interest rate after the introductory deal. Alternatively, if you will be clearing your balance in full each month, you may do better out of a cashback or reward card.
If you’re planning to use your card abroad watch out for exchange rate fees. These are easily missed, and can cost 5% or more of your withdrawals. We’ve rounded up the best fee-free cards to take abroad here.
Finally, if you already have credit card debt, you might want to find the best credit card for balance transfer deals - preferably one charging 0% on balance transfers. But don't forget to look out for the fees too.
Here's our line-up of the best credit cards for rewards and cashback.
Best 0% purchase cards
Tesco Bank’s Clubcard Purchase Card leads the pack, charging no interest for 28 months, providing you don’t go over your credit limit or miss a payment. It charges no interest on balance transfers for three months, though a 2.9% fee means you’ll pay £87 for a £3,000 transfer. You’ll earn Clubcard points worth 1.25p per £1 you spend in Tesco, and 1p’s worth of points for every £8 you spend elsewhere. Outside the introductory deals, the interest rate is 18.9% APR.
Sainsbury’s Bank’s Nectar Purchase Credit Card now offers the same 28-month interest free period, with a significantly longer 18 month 0% interest for balance transfers, subject to a 2.89% fee (£86.70 on a £3,000 balance). You’ll earn 1p’s worth of Nectar points for each £1 you spend in Sainsbury’s, and 1p’s worth for every £10 you spend elsewhere. The interest rate is 18.9% APR representative.
Post Office Money’s Matched Card charges no interest on purchases for 27 months, providing you repay at least the minimum each month. It also includes a 16-month 0% interest balance transfer period, which is subject to a 2.98% fee (£89.40 on a £3,000 balance). The card’s standard rate is 18.9% APR representative.
Best balance transfer cards
If you are in debt then a balance transfer card, if used properly, can be a great way to manage that debt and reduce the amount you’ll need to pay back.
Look for a card that offers a substantial 0% period, so you can clear your debt before it reverts to its normal APR and you end up paying interest. Remember 0% interest doesn't mean free - many of these cards will charge a balance transfer fee, of up to 3% of the balance.
Halifax has one of a handful of cards that charges no fees at all on balance transfers, letting pay nothing to transfer an existing balance for up to 25 months.
Elsewhere, Tesco Bank and Virgin Money will lend fee-free for 24-months on its 0% balance transfer card. Outside the introductory offer, these trio all charge 18.9% APR representative.
The Halifax card also includes six months’ interest free purchases, while Virgin charges no interest on purchases for three months. Purchases with Tesco Bank are interest-free for one month. With the AA card, you'll only get 22-months interest free if you transfer less than £500, though larger balances will qualify for the full two years.
If you’re willing to pay a balance transfer fee to get more time to clear your balance, Sainsbury’s Bank has a record 42-month 0% deal, though a chunky 4% fee means you’ll pay £120 to transfer a £3,000 balance.
There are several 0% introductory offers for money transfers, giving you up to three years to clear your debts without paying interest. As with balance transfers, you'll need to watch out for the fees, which are typically 3%-4% for money transfers.
Virgin Money has the lowest fees for money transfers. Its 32-month 0% Money Transfer Card charges 1.69% of any money transfer, equivalent to £50.70 on a £3,000 balance.
An overdraft is an agreement with your bank that authorises you to withdraw more funds from your account than you have deposited in it. Many banks charge for this privilege either as a fixed fee or charge interest on the money overdrawn at a special high rate. Some banks charge a fee and interest. And other banks offer a free overdraft but impose very high charges for exceeding the agreed limit of your overdraft.
An account opened with a clearing bank (few building societies offer current accounts) that provides the ability to draw cash (usually via a debit card) or cheques from the account. Some pay fairly minimal rates of interest if the account is in credit. Most current accounts insist your monthly income (salary or pension) is paid directly in each month and they offer a number of optional services – such as overdrafts and charge cards – which are negotiable but will incur fees.
Moving money from one account to another, whether switching bank accounts or more likely transferring the outstanding balance on your credit card to another card that charges a lower – or 0% – rate of interest. Some card providers may charge a transfer fee that can be a percentage of the balance transferred.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.