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How to use a 0% credit card deal the smart way

Robin Bowman

Robin Bowman
May 11, 2017

All credit cards are not the same.

The difference between them can sometimes be hard to spot, but matching the right card to your needs, or more specifically your spending habits is always financially astute.

One of the most heavily marketed deals out there is the 0% one.


0% interest.  

Now, considering the interest rates on credit card repayments (if you fail to clear your spending each month) are among the highest you’ll encounter, a 0% deal in which you borrow for nothing sounds, well, it sounds great.

But, of course, a 0% deal has a time limit because the card companies are only in the business to make money, not to act as charities.

The 0% offer can range from a few months to a couple of years and during this time you can spend without paying any interest.


What’s the catch?

Well, there isn't one really, other than the danger that you’ll build up a big debt you can’t pay off when the deadline comes around.

After that, the credit card companies are on a winner because you’ll almost certainly start paying interest in double figures on your debt.

Double figures when base rates are at 0.25%.


Why are 0% deals offered anyway?

If you borrow money and pay it all off within the time limit, they aren’t going to make money off you.

Fail to pay it off and they’re laughing.

This is why the card companies offer them – they want you to keep that debt jogging along after the 0% deal ends.

Make sure you use this deal in a way that wipes the smile of their face.


Best use

What these cards are terrific for is making a big purchase that you can’t afford to pay for in one go.

But this is only if you do your sums first.

The temptation is to just dive in and worry about credit card repayments later. Big mistake!

Instead, work out how much you’ll need to pay off the debt each month to reach zero by the time the 0% deal ends.

Or, better still, allow yourself a bit of a cushion and work out how much you’ll need to pay to get rid of the debt a month or two before the deal runs out.

And then stick to the plan.

This way, you’ll effectively be receiving free credit.


Double bubble

Of course, you don’t need to use your monthly payments to actually pay the credit card company. There’s no problem with letting the debt just sit there.

Instead, use your monthly payments to pay into an interest-bearing account so that by the end of the 0% period, you will have built up a bit of interest.

You’re not going to earn much at all through monthly payments on an instant access account, but anything you earn means you’re ahead.

But, don’t miss payments. Manage your money.

The BIG DANGER is that you just run up big debts and you make no attempt to pay them off and have no chance of clearing before the deal ends.

That would be an expensive mistake.


How to choose the best 0% deal

This is the simplest part – so long as you manage the debt by setting aside money to pay it off before the deal ends, just choose the longest 0% period on offer.

So long as you’re confident of paying off your debt in this way, it won't matter what interest rates are charged when the 0% period ends.

And, if the card doesn’t offer perks and only an expensive rate of interest after your deal ends, cut it up!

Read more: Choosing your first credit card - a guide for beginners