0% Credit Cards 16 mths interest-free spending

Do it right and credit cards are the cheapest way to borrow, you can get 0% for up to 16 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.

Is a credit card right for you?

Debt isn’t bad, bad debt is bad. Yet in these recession and credit crunch hit times, all borrowing is tinged with the dark side, 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....

Is it worth getting a card?

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 (see the stop spending guide for more).

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 is possible to borrow at no cost.

• Make at LEAST the minimum repayments
  
  Ensure you set up a direct debit for at least the minimum repayments as soon as you are accepted. Even though you are 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.
• Clear the card within the 0% period
  
  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.
• Diarise the end dates
  
  It's vital you make note of the 0% end dates (or use the Tart Alert) to ensure 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.

Pick the right type of card

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 cheapest cards for new borrowing

The choice is simple. Those who can pay off in under a year, 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. Also see the best cards for poor credit scorers section.

If your application's rejected, immediately check your Credit Rating. 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. See the Low Credit Limit guide.

The Longest 0% deals

The main aim is to find the card which will give you the longest 0% introductory deal. The 'go to' rate that cards jump to after the 0% periods are also listed, but as these cards are only for tarts/quick repayers this shouldn't affect you.

These cards are getting more competitive, so now you may also pick based on extra perks, such as cashback.

Longest open-to-all 0% purchase cardTesco, plus collect Clubcard points

• Spending length: 16 months 0%
• Rep. variable APR: 16.9% (Official APR Example)
• Card issuer: Mastercard
• Min. Income: £5,000
• Min. Repay : Greater of 1% of balance plus interest or £25

The Tesco Clubcard Credit Card gives 0% for 16 months on new purchases and for non-Nationwide customers, comes top. You must earn over £5,000 in order to apply. After the 0% rate ends, it's 16.9% representative APR after, so ensure you've repaid in full or switch to a top Balance Transfer card.

• Spending rewards. Every time you spend you accrue Tesco Clubcard points - 1 for every £4 spent. If redeemed for Tesco's Clubcard Rewards, they're worth about 3p each, making this equivalent to a 0.75% cashback card.

You can get a slightly shorter length 0% period with Marks and Spencer, plus reward points to spend in there - good if you shop there more than Tesco - see full details. Or if you're not interested in the loyalty schemes, see Barclaycard below.

Tesco often has special deals where you can collect extra Clubcard points, and sometimes even make a profit. For more details, read the Boost Tesco Clubcard Points guide. If you're a big M&S shopper, see its card below, which matches the Tesco spending deal.

15 months open-to-all 0% purchase cardM&S, plus 0.5% back in vouchers

• Spending length: 15 months 0%
• Rep. variable APR: 15.9% (Official APR Example)
• Card issuer: Mastercard
• Min. Income: N/A
• Min. Repay : Greater of 1% of balance plus interest, 2.5% or £5

Another card offering 0% on spending for a slightly shorter 15 months is the M&S* Credit Card. After this the rate jumps to 15.9% representative APR.

• Spending rewards. You also collect points as you spend which will be converted into Marks & Spencer vouchers quarterly. You get 0.5% back on most purchases (50p per £100 spend) and 1% when you spend in M&S.

Matching 15 months at 0% is the Barclaycard below, worth considering if you don't need the loyalty perks that come with M&S and Tesco.

M&S, like many other banks, try hard to sell you other products and memberships once you are a customer, so be wary. Make sure you really need something and can't get it cheaper elsewhere before parting with cash.

15 months open-to-all 0% purchase cardBarclaycard, plus 15 months on 0% BTs (2.9% fee)

• Spending length: 15 months 0%
• Rep. variable APR: 18.9% (Official APR Example)
• Card issuer: Visa
• Min. Income: £20,000
• Min. Repay: Greater of 1% of balance plus interest, 2.25% or £5

Offering 15 months 0% on purchases is the Barclaycard Platinum*. It also gives 'Freedom' reward points. However, you only earn these in a small set of shops, so it's not yet as big a boon as Tesco Clubcard or M&S schemes.

This card also offers 15 months 0% for balance transfers with a 2.9% fee, making it a good 0% BTs and Purchases card. You must earn £20,000 a year, and not already hold another Barclaycard in order to get this deal (and pass a credit check).

The card has an 18.9% representative APR on both BTs and spending, so ensure you repay within 15 months or shift to a new 0% BT card.

15 mths 0%, only for top credit scorers Halifax, only for 51% of applicants

• BT and spending length & fee: 15 months 0%
• Representative variable APR: 17.9% (Official APR Example)
• Card issuer: Mastercard
• Min. Income: N/A
• Min. Repay : Greater of 1% of balance plus interest or £5

The Halifax* All in One card has 0% on purchases for 15 months. But only a minimum of 51% of applicants will get the deal - the rest will either get 13 or 11 months 0%.

Under EU rules, card providers must "reasonably expect" 51% of those accepted to get the advertised rate. When it's a promo deal, card firms often give it to all those accepted. But Halifax has taken this a step further. The promotional 15 months 0% will be given to "at least" 51% of those accepted. The rest will either get 13 or 11 months 0%. So only apply if you have a top Credit Rating, otherwise look at the options here.

It also gives 15 months 0% (or 13/11 months) on balance transfers, with a 3% fee. The interest rate after is 17.9% representative APR for both purchases and BTs, if you don't get the 15-month deal it'll be either 21.9% or 23.9%. So make sure you've paid it off, or you're ready to shift the debt to a new Balance Transfer Card.

Beware balance transfers

There's a devious trick some cards play if you have a 0% for purchases deal. Often they also allow you to shift debts to the card, but this can be at a higher interest rate.

The rules changed at the start of 2011 and now repayments must go towards the most expensive debts first. But as you're unlikely to be able to repay in full, you'll still get charged interest.

So if you need to transfer debts it's best to use a separate card instead, see Best Balance Transfers.

Cheapest long-term low rate deals

Here, the aim is to get a card where the low rate is for the long term, not just an introductory offer. While not 0%, it does mean that you don't have to remember to shift from card to card, and know you've got a deal for the long term.

Long-term lower rate, no feeSainsbury's (need a Nectar card)

• Spending Rate & Fee: 6.9% APR, no fee (see official rate example)
• Min Income: N/A
• Card issuer: Mastercard
• Min repayment : Greater of 1% of balance plus interest, 2.25% of balance or £5

The lowest long-term rate card comes from Sainsbury's* with 6.9% representative APR. You'll need a Nectar card to apply (must have been used in the past six months), though you won't earn points as you spend.

Is the rate fixed? While the card is variable rate, credit card regulations mean it's not allowed to increase within the first year, and after that as long as you agree not to borrow more you have a right to reject any rise (see Rate Jacking guide for full rules).

Like all credit cards, to get it you'll be credit scored. While 51% of accepted applicants will get 6.9%, some slightly poorer credit scorers will be given the higher rate of either 9.9% or 12.9% APR. It also has the same rate on debts shifted to the card with no fee, though if you need this it may be better to look at the other Best Balance Transfer cards.

How to turn it into a loan. If you need to borrow less than £5,000, and want to use the lump sum to buy something that can be put on a credit card, this rate smashes the cheapest normal personal loans.

Yet the big dangers of using a card as a loan are you choose your repayments, and there's a temptation to spend more later. Proper loans are fixed to clear the debt in a set time and you can't borrow more. Read Cheap Credit Card Loans guide for more details.

To replicate the discipline of a loan, once you've done your 'loan' spending, lock the card away (freeze it?!) and set up a direct debit to repay a fixed monthly amount, designed to clear the loan within a set time (use the loan calculator to work this out).

Alternative long-term card, fee-freeBarclaycard Simplicity

• Spending Rate & Fee: 7.9% APR (see official rate example)
• Min. Income: £20,000
• Card issuer: Visa
• Min. repay: Greater of 1% of balance plus interest, 2.25% or £5

The next lowest rate is with the Barclaycard* Simplicity, which charges 7.9% representative APR.

Is the rate fixed? While the card is variable rate, credit card regulations mean it's not allowed to increase within the first year, and after that as long as you agree not to borrow more you have a right to reject any rise (see Rate Jacking guide for full rules).

Like all credit cards, to get it you’ll be credit scored. While 51% of accepted applicants will get 7.9%, some slightly poorer credit scorers may be given a higher rate. There are reports of it giving low credit limits.

Can these cards be used for balance transfers too?

On these cards often - but not always - the rate applies to debt that is shifted to the card. If that's the case, and you're looking for long term cheap debt it's likely to be reasonably competitive and there's nothing wrong with doing it. Though always compare to the Best Balance Transfers first.

Yet don't assume the rate automatically applies for all transactions. For example Barclaycard Simplicity charges a big 15.8% rate for cash withdrawals. So never, ever, ever use it - or any credit card for that matter - for withdrawing cash.

Think before adding the 'insurance'

Payment protection insurance is commonly sold with credit cards. The idea is it'll make some payments for you, usually for a year, if you are unable to (eg, if you lose your job).

There have been a myriad of cases where it has been mis-sold. In some cases, borrowers didn't realise they were signing up for it, or it was totally unsuitable for them. Some big lenders have been fined.

The protection isn't always bad. But policies sold with cards are often overpriced - you pay a monthly amount depending on the size of your balance. If you want it, compare the lender's cover with standalone providers such as Paymentcare or Best Insurance.

Always be vigilant and check you aren't getting more than you bargained for when you fill in the application. Then check your statement each month to check you aren't inadvertently paying for extras if you didn't ask for them.

Worried about being rejected?

The cards listed above are the market's top deals. Some of them require a good credit score. If you're worried about this, there are still ways to get good deals.

• Check your credit score for free
  
  Understanding why you may be rejected is crucial for picking the right card. So first use the Free Credit Check guide for a full explanation and how to check.
• If you've only limited/minor issues
  
  The top cards listed above should still be accessible to you. Just avoid those which are particularly harsh credit scorers.
• Use a 'credit-worthiness' comparison
  
  Those with only poor to moderate credit histories can use special credit-worthiness comparisons. They don't do a credit search, as that itself would hit your credit score, instead they just ask a few basic credit history questions, giving a rough and ready assessment, followed by 'suitable cards'.
  
  These services don't cover all cards, so they're only for those people with credit issues. The top pick is MoneySupermarket*, which asks a few quick questions and uses ‘soft searches’ of your credit file, which importantly don’t leave a mark (hence don’t hit future applications).
  

Should you tart? Keep your debt at 0%

While disloyalty is frowned upon in relationships, it's lauded for consumers. Credit card tarts shift debt from 0% deal to 0% deal to ensure the minimum possible cost for their debts. This is the cheapest way to use credit cards, but it takes discipline and a good credit score.

How to tart

If you're a new tart, the process is pretty simple.

• Get a 0% purchases card
  
  This is a card that you can spend on, and all the spending will be at 0% for a set period. See the longest 0% deals below.
• Ensure you make the repayments
  
  All 0% interest means is that there is no cost to the borrowing; it still needs to be repaid. Ensure you make at least the minimum repayments to avoid being fined, or worse having the 0% deal withdrawn, meaning you need to pay the expensive standard rate.
• Move or repay the debt BEFORE the 0% period ends
  
  At the end of the 0% period the rate will jump to the standard APR which will usually be a around 20%. At this point you either need to have the card cleared or shift it to a new card with a 0% Balance Transfer deal. If you still haven't repaid the debt when that deal closes, shift it again.

To tart or not to tart?

Tarting is without doubt the cheapest method, but takes active management and you need to stay on top of it. If not, there's a big warning...

Unless you shift the debt before the 0% period ends, it only takes a couple of months before all the gain is lost.

The other thing that's important to understand is that to tart, you're going to need a good credit history, so it's important to Check Your Credit Rating, which can be done for free before you start. Plus the nature of repeated applications can have an impact on your score.

So if you're going to take well over a year to repay and aren't good with money, or have a poor credit score, then it's best to stick with the best long term low rate deal instead.

The size of the saving

Someone spending £400 and repaying £150 each month on a on a First Direct Visa card at 17.9% would pay £300 interest in year one. On the Tesco card they'd pay nothing in the first 12 months.

Over three years the charge with First Direct is an enormous £2,800. Tesco, as the rate jumps to 16.9%, costs £2,100. But Sainsbury's costs only £1,050, while a good Credit Card Tart would pay nothing.