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Do I need a balance transfer card or a 0% card?

When looking for a credit card, there are so many different options and it’s easy to get confused with all the different terms. Do I need a balance transfer card? Do I need a purchases card? Can I have both? What does fee free mean? Here is your one-stop shop for understanding the difference between a balance transfer card and a 0% interest on purchases credit card.

Do I need a balance transfer card?

The question really is do you have debt that you need to clear? Balance transfer credit cards are a useful tool to consolidate debt and get it out from underneath high interest charges. An unpaid balance on an existing credit card is charged at that card’s APR, typically an average interest rate of 19%. You can use a balance transfer card to move debt from the existing credit card to a card with a 0% introductory balance transfer offer – basically, going from 19% interest charges to paying nothing at all – making a substantial difference to the interest you pay on your balance.

The best way to use a balance transfer card is to make a repayment plan and stick to it, with the aim of making sure that the balance is paid off in full before the promotional period ends. Typically when introductory offers end, the card will revert back to its APR.

Something to be aware of is balance transfer fees. Usually cards with the longer introductory periods carry a balance transfer fee of around 2–3%. Therefore, if you were to transfer a balance of £2,000, and the card had a transfer fee of 3%, you would have to pay £60 to transfer your balance. This is something to consider when selecting your card, because there are fee-free options out there, but they typically have a shorter introductory 0% interest period.

Do I need a 0% interest on purchases card?

Are you planning on making a large purchase and paying it off over several months? Then most likely a 0% interest on purchases credit card would suit your needs. Most credit cards grant you an interest-free period on purchases of up to 56 days – basically a limited amount of time to borrow money for free.

However, if you require longer to pay off your purchase, then there are lots of cards on the market that cater to your needs with an interest-free period on purchases being anything from three months to 27 months. This means if you were to make a purchase when you first take out your card, you would not have to pay anything in interest until the end of your introductory period when the card reverts back to its APR. This would allow you to make repayments each month to pay down your balance, without being caught out by high interest charges.

Can I have both a balance transfer card and a 0% interest on purchases card?

The answer is yes; there are several cards on the market that offer both a balance transfer introductory period and an interest-free period for purchases. The length of time for both these deals varies. If you have a long balance transfer deal, then the card is likely to have a shorter 0% interest on purchases offer – and vice versa. Some cards offer the same introductory period for both balance transfers and purchases, but these are then typically lower than the longest interest-free periods on the market.

Do you need 0% interest on both balance transfers and purchases in a card? Well that comes down to whether you have debt that you want to transfer over and also need to make a large purchase. If so, then you can achieve both goals with one card.

What else to look out for

When comparing offers on credit cards, bear in mind the above but also look at what additional extras cards have. There are balance transfer cards, 0% interest on purchases cards and dual-offer cards that also provide things such as cashback, welcome bonuses or loyalty reward points. These may not be the main reason why you would take out a card, but if you can gain something from either the balance you transfer or the money you spend then it is worth doing your homework and seeing what would suit you best.

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