If you have a good credit limit when you are offered a credit card, chances are you will be enticed by a 0% APR offer for a period of time.
The longest 0% period on spending, according to Money Saving Expert, is a card offering up to 28 months on spending and balance transfer for new customers. However you will need to pass a credit check and the 0% offer you receive, may not be for the full advertised 28 months.
These types of cards are great if you are currently being stung by interest on an existing card or if you have a large purchase to make as it will allow you to pay it up, interest free!
To get the best from these cards, always pay at least the minimum payment every month and on time! One missed or late payment and the 0% deal will end and you will be put onto the standard variable APR, which is typically 17.9%.
You must ensure you repay the debt before the end of the interest free period and stay within your credit limit. To ensure this happens, take your spend and divide it by the interest free period, include a few months as a buffer and this is the monthly payment you should make.
As an example, if you take out a card with a £5,000 credit limit, the deal length is 24 months and you spend £4,000 on home improvements, the regular monthly payment would be £200 to ensure repayment before the deal ends. This is calculated by dividing the £4,000 by 20 months (allowing for extra months as above).
It’s easy to run up credit card debt and only pay the minimum but it will end up costing you hundreds, possibly thousands of pounds in interest if not paid within the offer period.
Worryingly, if you’ve adopted the “spend now, worry about it later” mindset and you still have £3,000 left to repay at the end of your deal it will take 27 years and 4 months to clear the debt. This is based on the typical APR mentioned above and if you continue to pay the minimum payment of 1% plus interest or £5 (whichever is higher).
If you’re struggling to pay off credit card or any debt, speak to one of our experienced debt advisors today. Our debt advice is free, so if you decide it’s not for you, that’s ok and all information you give us will be treated in confidence.
Call 0141 886 0017, use our debt calculator to work out the affordable monthly payments you could be making to clear your debt or speak to one of our debt experts using Live Chat.
Facts correct as at May 2019.
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