Pay ZERO interest on your Credit Card debt

When you get a credit card, the one thing of concern is the interest rate. Unmanageable and very high interest rates can be a problem when managing our money. While credit card companies make money off of high interest rates, we can sometimes struggle to keep up and are left with high repayments and bad credit scores. If you have credit card debt or want to make a big purchase, keep reading to learn how to pay off your debt and no interest using Balance Transfer and Purchase credit cards.

Let's change the game
In this post, we learn how to pay zero interest rate using credit cards. This applies if you 1) already have a high credit card balance or 2) you want to make a large purchase. There are rules to play by but learning this technique can put money  back into your pocket as opposed to putting the money in the lenders account.

Key Points
Balance Credit Card
Move debt from your existing credit card to another and pay ZERO interest during the interest free period
Purchase Credit Card
Buy goods or services and pay ZERO interest during the interest free period

Your Credit card should be doing this for you

A credit card is a type of unsecured debt that is to pay for goods or services. If you are able pay in full, you credit card helps you build a good credit score and puts you in good financial health. If you do not pay in full, lenders charge high interest rates and the debt can grow if it is not managed.
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Make sure your credit card is giving you one of the following. You can contact your lender to discuss options available to upgrade your card.

1. Cashback
2. Travel Miles
3. Vouchers or points
4. Any other rewards

Read More
The Good and Bad of the Credit Card
How to build a Credit Score

Use a Balance Credit Card to pay ZERO interest if you already have credit card debt

A balance credit card is a product that allows you to move your leftover credit balance onto a balance credit card. Doing this allows you:

• To pay 0% interest for a set period e.g. 3 to 29 months. This is the interest free period. After the interest free period, the interest rate  can be very high e.g. 21%
• During the interest free period, you pay down your debt and no interest
• Before the interest free period is over, you can close the account with no penalty

An Example: The good and less good way of using Balance Transfer Credit Card
Jess has £5,000 in credit card debt to pay. So far, Jess pays the minimum per month and also pays interest. Jess wants to pay this debt off in 18 months and has been working on improving her credit score. Jess looks online and see companies like Virgin money, Halifax, HSBC, M&S and more who have balance transfer offers. Jess applies and moves her balance to the new balance card. She makes sure she pays the minimum each month to retain the interest free off. By month 16, Jess has paid off all her debt. She closes the account with no penalty and moves on with the rest of her glorious life.
THE OUTCOME: Jess pays off ALL  of her debt and ZERO interest.

If Jess only paid £3,000 during the 18 months, the left over debt of £2,000 will incur an interest rate of e.g. 20%.
THE OUTCOME: Jess pays down SOME of her debt and pays HIGH interest on the remaining debt

Use balance credit cards if:

• You are currently paying interest on your current card and want to pay ZERO
• You are determined to pay off your debt in a set time 
• You can pay off the debt in full in the interest free time
• You do not plan to grow your debt and make it unmanageable

Tips
Download Clearscore or Experian. Depending on your credit score, they can pre-approve you for balance transfer credit cards. This means based on the information they hold on you, you can find out which card and terms you are eligible for. I checked with some friends and found that the better your credit score, to larger the interest free period you can get. So a friend with a relatively lower credit score, could get balance transfer cards with a maximum of 6 months interest period and another with the highest credit score was eligible for 29 months. Mind you, the credit limit you get will depend on your credit history.

When searching for a balance transfer card, keep an eye of on the following so you pay less:

• Choose Zero or low Balance transfer fee: the is the money lender charge to allow you to move your balance from one lender e.g. Halifax to the new card e.g. from TSB. This fee can be high and is usually a percentage of the amount you are transferring. Make sure this is as low as possible so take your time and shop around
• Annual Fee must be Zero. The goal is to keep more of your money and not spend.
• Choose a comfortable Balance transfer interest free period As mentioned above,  your interest free period depends on your circumstance. The higher the credit score, the longer time you are eligible for.
• Know the interest rate that applies following the interest free period, any left over debt is subject to high interest rates. At this time you can either choose to pay off the debt or find another balance transfer card to move the balance. 
• The credit limit (the maximum you can spend) will be determined by the lender in review of your credit score and other circumstances

Use a Purchase Credit Card if you want to make big purchases and pay it off in a given time

A Purchase Credit card, allows you to make a purchases and pay it off in a given time with ZERO interest. This works if you want to buy e.g. large furniture, travel tickets etc. If you are not able to pay off the debt in the interest free period, you could move the debt to a 0% balance transfer credit card.

A purchase credit card gives similar benefits to a balance transfer card.

• Pay 0% interest for a set period e.g. 3 to 29 months
• During the interest free period, you pay down your debt and no interest
• Before the interest free period is over, you can close the account with no penalty
• Annual Fee must be Zero
• Choose a comfortable interest free period 
• Know the interest rate that applies following the interest free period​ as it can be very high

What's the difference?
​
Balance Credit Card
Move debt from your existing  credit card to another and pay ZERO interest during the interest free period

Purchase Credit Card
Buy goods or services and pay ZERO interest during the interest free period

Final Thoughts
Balance Transfer and Purchase Card provide a good way to handle debt. You'll sometimes find lenders provide both balance transfer and purchase options on a given card. This can give you more flexibility to handle your money.

With good financial discipline you can significantly reduce the debt you pay and make your money work for you.  As with everything read the terms and conditions before you proceed with your application.