Do it right and credit cards are the cheapest way to borrow. You can get 0% for up to 23 months - yet get it wrong and you'll be stuck in debt for years.
This is a step-by-step guide, updated daily, to the cheapest credit cards for new borrowing and how to use them, saving you $1,000s.
With recent memories of the credit crunch and recession, many people now shy away from borrowing. Lose your income and debt will leave you in a nightmare. So before choosing which card is right for you, watch out for the following...
You don’t need this guide, which is about cards with cheap ‘purchases’ interest rates for new borrowing.
The big worry about credit cards is they allow you to borrow willy-nilly. There's no structure in place to ensure repayment. This is one of the reasons they’re the primary cause of personal debt crisis. Many people simply use their cards to supplement their income.
To correctly use a credit card, ensure all borrowing is planned, budgeted for and as cheap as possible. If you’re just grabbing it to ease the strain on your pocket, that's a mammoth danger signal.
Always borrow as little as you possibly can. Yet it's not just about how much, but also how quickly you can repay. The quicker you can repay, the cheaper it will be.
If you’re getting a new card to help ease existing debt, it's likely you’re going to make things worse. The old adage ‘never borrow your way out of debt’ still holds true.
Credit card companies have an array of tricks to bite your cash. If you fail to repay in full, you'll pay interest on the whole amount. Miss a payment, or pay late, and you can lose any cheap interest deals, be fined and hurt your credit score.
Every time you apply for a credit card, it adds a footprint to your file for a year - and this is the case whether you're accepted or rejected. So, apply for too many cards, especially in a short space of time, and it can trigger rejections as it makes it look like you're desperate for credit.
Therefore, space out applications if you can. In fact it's almost worth thinking about applications as 'spending'. Is it really worth spending an application for a 0% card, or should you save it for something else?
So if you need a 0% card and have no other credit you need to apply for in the next six months or so, great, spend your application. But if you're just about to apply for a mortgage, wait until after you've done that. Prioritising is important.
You can read full information on how applications affect your file in our Credit Scores guide.
Debt is like fire. Used well, it’s a great tool. Used badly, you’ll get burned. Unless you’re financially disciplined and doing it tactically for stoozing, it's always worth borrowing as little as you need, and where possible, using savings instead of borrowing.
The worst thing to do with a credit card is to use it to fill the gaps your income doesn’t meet each month. That will see borrowings constantly grow and can leave you in a debt spiral.Ensure your borrowing stays free
However, if you need to borrow for a defined purchase, then used correctly, credit cards are cheaper than loans. This may be for a football season ticket, where it works out cheaper than forking out for individual matches; you may need a new sofa as the old one's kaput; or it might be to pay for a year’s car insurance as the insurer’s interest rate for paying by the month is huge.
Done right, it's possible to borrow at no cost.
Ensure you set up a direct debit for at least the minimum repayment as soon as you are accepted. Even though you're paying 0%, you still need to make repayments. If you miss one, you will lose your 0% deal, so the rate will jump and you'll get a £12 charge.
Go even one month beyond the promotional period and the rate rockets, so calculate the amount needed to clear the balance by then. For example, borrow £600 on a year’s 0% card, divide the spend by the number of months (£600 / 12) to get the monthly repayment - in this case £50 - and set up a direct debit to do that.
It's incredibly vital you make a note of the 0% end dates (or use the Tart Alert) to make sure you pay off the debt in time, or be ready to switch to a new Best Balance Transfer deal. If you forget to switch when the deal ends, the interest cost will swiftly outweigh the card's benefit.
To do this properly isn't just a question of getting the right card. It's about understanding how it works, and how to avoid the massive pitfalls.
To find out the best way for you to borrow, answer the questions below. They'll assess how you spend, and direct you to the relevant part of the guide.
The choice is simple. Those who can pay off in under 20 months, or are willing to tart, should go for a 0% deal. Everyone else should pick the cheapest long-term low rate. All the following deals only apply to NEW cardholders.
If your application's rejected, check your credit rating immediately. If you're accepted and the credit limit is too low, don't chuck the card as it's already on your credit file. Simply apply for a second card to use alongside it.