When borrowing can benefit
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Length isn't everything - when it comes to 0 per cent credit cards for spending that is. We are in the midst of a borrowing renaissance: the longest ever 0 per cent card of its type has been launched, giving 15 months interest-free spending, plus reward points. Done right, credit cards are the cheapest way to borrow: done wrong they can cost a fortune.
● Is borrowing right for you?
Debt isn't bad, bad debt is bad. Used correctly, a credit card can save, not cost, cash. Take someone who regularly attends football matches - if they don't have a lump sum for a season ticket, they pay more for individual tickets. Borrowing the money for the lump sum saves cash. Or, it may be to pay upfront for a new kitchen instead of using the shop's finance scheme. And with car insurance, if they say 'pay monthly', you repay the debt at a much higher rate than the cheapest credit cards.
● How to borrow properly
● Want to cut existing credit card debt costs? If so, you need a card offering cheap balance transfers. 0 per cent for 20 months is possible, then 17.5 per cent representative APR after. See www.moneysavingexpert.com/balancetransfers
● Don't get cards to supplement day-to-day spending. Instead, do a budget and rein in your spending.
● Plan your borrowing. Even if you are borrowing for a specific purpose, ensure you keep the debt to a minimum and plan the repayments having budgeted to check it's affordable.
● Ensure your borrowing stays free. A 0 per cent card is only interest-free for a set period of time, after which the rate rockets to the standard APR, normally 15 per cent up. For safety's sake pay off the debt at least a month before the deal ends, as even a single interest payment will eat away at your gains.
● Interest-free doesn't mean no repayments. There is still a minimum amount you have to pay back each month. Miss that and not only will you be fined, it affects your credit score and the bank will probably remove the 0 per cent deal and shift you to its standard APR. Set up a direct debit to repay, so you never miss this.
● The longest 0% deals
The banks will carry out a credit search, like with any credit card. Because these are at the top of the 'best buy' tables, don't expect to get one unless you have a decent credit record.
● M&S are doing 0 per cent for 15 months on spending - 15 months is the longest 0 per cent deal I have ever seen. Once that ends, it jumps to 15.9 per cent representative APR. Representative, sadly, means only 51 per cent of accepted cardholders must be given that rate - the other 49 per cent can be put on much higher rates.
The card also gives points on spending which are converted into Marks and Spencer vouchers every quarter. You get the equivalent of 0.5 per cent back on those purchases (50p per £100 of spending), and double that if you spend in M&S itself.
● Tesco: 0 per cent for 13 months on purchases. Until M&S launched, this was the big beast with its 13 months 0 per cent followed by 16.9 per cent representative APR. You earn one Clubcard point per £4 spent. Each point is worth a penny redeemed in-store or roughly 3p via Tesco's Clubcard Rewards brochure, ie: 25p or 75p per £100 of spending.
● American Express Platinum, six months at 0 per cent: This gives new cardholders 5 per cent cashback for the first three months (£5 per £100 spent) up to a max of £100. After that the cashback is tiered at rates up to 1.25 per cent. So if you have a big planned purchase and can repay in six months, it's a winner. But beware: after six months it jumps to 19.9 per cent representative APR. For more options see www.moneysavingexpert.com/0percent
● These cards can pay you
The technique of profiting from plastic debt is called Stoozing, but it is strictly only for the debt-free. In a nutshell, you spend on the card instead of using your bank account. The unspent cash that builds up there can then be saved at high interest until it is time to repay the card in full. You can make £100s doing this right, but be careful. Full info at www.mse.me/stoozing