If you’ve ever owned or considered owning a credit card, you may have come across interest-free credit periods. Well, current credit conditions in the UK mean that a number of high street banks are extending their interest-free periods for the foreseeable future.
Here’s how you can take advantage of the situation and make the most of interest-free credit!
What are interest-free periods?
Interest-free periods, or 0% interest periods, are specified amounts of time in which banks do not charge any interest on credit card loans. These interest-free periods typically occur during the first few months of using a credit card or at the time when you pay off your credit card debt in full. Interest-free periods will usually end on the due date of your credit card repayments.
Most banks will offer a specified interest-free period that could be anything from a few days to several months. Interest-free periods can apply to both purchases and balance transfers. However, some credit cards offer one but not the other, so it’s a good idea to check exactly what you can do interest-free.
When the interest-free period expires, if you have a balance remaining on your card you will start building up interest. You will have to pay this interest off over time.
How can you make the most of interest-free periods?
Due to the rising demand for credit card lending, high street banks are expected to increase their interest-free periods. This means that credit card users will be able to borrow with 0% interest for a longer amount of time. Here’s how you can make the most of the interest-free period on a credit card.
Make big-ticket purchases on your credit card
Big-ticket purchases are items that cost large amounts of money. They could be a new TV, a car or even a kitchen renovation. Due to the high price of these items, it is wise to purchase them during your interest-free credit card period. This way, you can avoid accumulating large amounts of interest on just one item. Making these purchases at the start of the interest-free period on a new credit card will also give you more time to pay off the debt before the interest starts adding up.
Avoid making cash withdrawals
Many credit users get caught out by taking out cash during interest-free periods. Most credit cards only offer 0% interest for card transactions and can charge a large fee for withdrawing cash, and the interest for this is usually added immediately. It is wise to check the interest rate for cash withdrawals from your credit card before making any cash purchases. Avoiding cash withdrawals is a great way to make the most of 0% fees and prevent any unwanted interest fees from building up on your bill.
Set reminders for end dates
It can be easy to get carried away with spending during your interest-free period and end up making purchases when the period has come to an end. To avoid this mistake, you should consider setting reminders on your phone that will notify you when your interest-free period is coming to an end. Be sure to pay off all of your pricey purchases before this time to avoid accumulating unnecessary interest.
Use multiple credit cards
If you have multiple credit cards, each card will have a different interest-free period. You can use this to your advantage by spreading big purchases between the cards so that your spending is even throughout the month. Plan your spending so that you are always within a 0% interest period. If you plan things correctly, you will be able to spend interest-free throughout the month!
Remember, using a credit card comes with risks even when your spending is interest-free. Always think carefully before making a purchase and try to stay on top of your debt by paying off your monthly bills on time.