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Should you get a 0% credit card deal?

submit PPI claimYou don’t get something for nothing is a good maxim. And it’s certainly true when it comes to borrowing money. Take 0% interest balance transfer credit card deals. These seem the best idea since sliced bread. If you’ve got a debt on a credit card, then you’ll be racking up interest of close to 20%. So instead, you take out a 0% balance transfer card and shift your debt over onto that card. Bingo. No interest.

Or maybe it’s not such great news. First of all, you need to pay a fee for moving your cash onto a balance transfer card – about 2-3% usually. But the big thing with these cards is that you must use the balance transfer period to clear the debt or the point of the exercise is wasted as you’ll still have a debt and it will be racking up interest. You could I suppose apply for another 0% deal but I’m not sure that multiple credit card applications will help your credit record. The other thing is that you might well not get one of these 0% deals – you will need a good credit record – one that shows evidence that you can handle debt and have enough income to support it.

I don’t have a 0% card and I don’t want one. Frankly, there are moments when I really could do with an injection of interest-free cash and this is one of those times. While I’ve cleared all the Christmas costs, I’ve just had to pay for some emergency plumbing that I hadn’t bargained on. And it’s the boy’s 13th birthday next week and I haven’t bought him a present yet. So how easy would it to be to get a 0% interest card, one that lets me spend free from interest and move over an existing credit card debt too?

But I’m really against this as a plan. I don’t have much – a few hundred pounds – debt on my card. None of this has been sitting on my card for more than a few weeks as I pay it off in full every month even if it means dipping into savings. If I had a 0% card, then I would probably build up a chunky debt, living on the never-never. And I doubt whether I’d get a 0% card anyway: my self-employed income probably is too low to make me an ideal candidate.

I think that 0% cards are best for the financially sophisticated who can use them as a way of deferring repayment when they already have the money sitting elsewhere (or will definitely have it by the end of the 0% interest rate period). For the rest of us, any debt on credit cards is best avoided totally: because it will have to be repaid eventually.

And if you think I’m being a killjoy, then consider this. According to the Money Charity credit card debt reached £72.2 billion in December 2018 which works out as £2,634 per household. What’s more, 54.1% of credit card balances are on cards charging interest, says UK Finance. Moneyfacts says that the length of 0% credit card deals has been cut after the Financial Conduct Authority told lenders to tackle persistent debt. As a result, the longest 0% balance transfer deal is now 32 months. A year ago it was 37 months; two years ago it was 43 months.

If you still want a 0% card, then you must calculate how much you need to pay each month to clear the debt within the 0% period. Leave yourself a little wriggle room and maybe try to pay it off a month or so in advance. And whatever you do, don’t spend money on the card. Otherwise all you’re doing is building up more debt and the constant money-go-round will start to spin out of control. You can find the best credit card deals on comparison sites including uSwitch*, Moneysupermarket*, comparethemarket* and confused.com.

And see our guide to credit cards here

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Wednesday, 22 May 2019