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MoneySavingExpert.com » Credit Cards and Loans » Credit Card for New Borrowing: How to borrow interest free for up to a yea

Debt isn't bad; only bad debt is bad. There's nothing wrong with deciding to borrow, providing it's planned, budgeted and as cheap as possible. This article's about the best lending for regular spending, and it could save you nearly £1,000 a year - yet always clinically consider whether you really need to borrow and whether you can truly afford the repayments.

Which card is right? The tart's solution BEST BUYS: The longest 0% deals Stable relationships BEST BUYS: Long term low rates Worried about rejection? Size of the Saving Other Articles/Discuss

Which one shall I use today?

Deal with existing debts first

The two major types of debt on credit cards are ‘debts from spending' and ‘debts shifted by balance transferring from another card'. Credit card providers treat these debts very differently. Never confuse them or it will cost large. The major priority for anyone with expensive existing debts is to read the ‘Best Balance Transfers' article before this one.

Watch out, lenders bite!

Credit card companies aren't nice. They've an array of tricks to bite your cash. Fail to pay off the card in full, even by just a few pounds and you'll have to pay interest on the whole amount; miss a payment, or pay late and you'll be fined, and do remember interest free doesn't mean nothing to repay. For more details on these tricks and how to avoid them, see my Credit Card Tricks note.

The tart's solution

What is tarting?

The aim of tarting is to keep all debts at 0% by continually switching deals. To do this start with a 0% card for purchases for the introductory period. Then before this intro period ends, if it still has debt on it, move it to a new card which offers 0% Balance Transfers and repeatedly do this until all the debt is paid off. At the same time, continue to use a new 0% card for spending.

Is there any reason not to tart?

Tarting is without doubt the cheapest method, but takes active management. Leave debt on the card, even for just a couple of months, after the 0% period ends and you've defeated the whole exercise.

If that's likely to happen to you, forget tarting and go for a ‘Stable Relationship' strategy instead. It's also worth being aware, excessive tarting can have a major impact on Your Credit Score.

A Very Big Warning!

If the special offer interest rate only applies to purchases, not balance transfers, there's a major catch. When you make repayments lenders bias them towards paying off the cheap debts first.

This means more expensive debts from balance transfers sit on the card speedily accruing interest but you can't start paying them off until the entire cheap purchases debts are repaid.

Therefore as a strict rule, Never Ever Ever balance transfer on a purchases cards. Use a separate card instead (see Best Balance Transfers).

The longest 0% purchases card for new customers

The top cards

The best 0% deal for new borrowing is HSBC's* credit card with 0% for 12 months followed by 15.9% APR. Next best is Halifax* at 10 months 0%.

Keep your eye on your letter and in-box

It's worth noting that you may very occasionally see web offers, invite-only direct mailings, and shopping centre sign-up stalls that match or even beat the above - keep your eyes peeled.

What if I don't get the card or the credit limit I want?

If you don't get the card, then it's worth immediately checking your credit reference files (see Your Credit Rating article). However this doesn't automatically mean other companies will reject you as well. The top players on the market tend to cherry pick the best customers. If you don't get the credit limit you want, don't simply chuck the card back at the lender. Now you have it, you may as well utilise it. After all you've already had a search added to your file, so there's no point in throwing it back out of spite (Read A Full Article On This).

To help you stop companies grabbing your cash, use m'free ‘Tart Alert'. Just put in the date when your 0% (or other intro rate) expires and choose whether you want a text or email reminder. Of course, like everything else on this site it is completely free and has no advertising.

The stable relationship solution

What's a stable relationship all about?

This simply means getting a card with a consistent, non-special offer, low rate for purchases; thus you don't have to shift from card to card as you know the one you've got in your pocket is at a decent rate, if not ultra cheap, and it's going to stay that way.

Cheapest long term standard rate

Virgin* offers 6.7% APR for all purchases, the cheapest standard rate around. This is an exclusive deal through price comparison site BeatThatQuote.com, and you can get it by using the link above. You'll need a good credit score to get this; anyone worried theirs isn't up to it may want to try Barclaycard Simplicity, which charges 6.8% APR (though be aware Barclaycard has been known to give low credit limits).

Technically these rates are variable and could change. However, the lenders say there are no plans whatsoever to change the terms. I interpret that as meaning it should stay as a cheap non-switchers card for the foreseeable future, though the rate could vary slightly; as always vigilance is important.

Can I use these cards for other transactions?

Both of these rates apply to balance transfers too, and are decent, if not quite table-topping deals (read Best Balance Transfers to see how they compare). One big thing to watch is the rate for withdrawing cash; Barclaycard charges a big 15.8% APR, while Virgin customers would pay a whopping 27.9% AER to do this, far outstripping the standard rates. This brings a very simple rule - never, ever, ever use them for withdrawing cash (It's my suspicion that the introduction of Chip ‘n' Pin means more people than ever know their Credit Card PIN numbers, and may take cash out; and this is banks' way of cashing in).

Worried about being rejected?

The cards listed above are the market's best possible deals. Some of them require a good credit score (see the How Credit Scoring Works article); otherwise you risk rejection or being shunted onto an inferior deal. What you do depends on how severe your credit issues are:

• Limited/Minor issues. Apply for the top cards as detailed in the article above, the likelihood is you'll be accepted; where a card is a particularly harsh credit scorer I've noted it.
  


• Use a 'credit-worthiness' comparison. Those with moderate to good credit scores, or who've been turned down for the cards above, 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 are useful, but don’t cover all cards, so they should only be used if you think you may have credit issues. It’s also worth noting the comparisons are basic and exclude issues like fees; so always double check it’s the correct product of you, following the logic in this article before signing up. Of the two services offering is, MoneySupermarket* ‘Smartsearch with Equifax’ option is strongest; there’s also the Find a lender service on credit file site Checkmy file – though that can be very limited.
  
  

• Get cheaper debts without new credit. You don't always need a new card to get new cheap credit. The Credit Card Shuffle article explains how to get your existing card companies to allow you to shift debts to them at a cheap rate. While existing cards won't usually offer a cheap rate for spending, it'll offer the ability to free up space on an existing cheap spending card.
  

Someone spending £400 a month on a card (repaying £150 each month) on a First Direct Visa card at 17.9% would pay £310 interest in year one. On Halifax's card they'd pay none at all. Over 3 years the charge with First Direct is an enormous £2,800; Halifax, as the rate jumps to 14.9%, costs £2,000, but Barclaycard's 6.8% card costs only £1,000 while a good Credit Card Tart would pay nothing.

Credit card interest for £400 spending/month, repaying £150 per month (1)
		Interest cost after
		6 months	1 year	3 years
First Direct Visa	17.9%	£90	£300	£2,800
Halifax Purchase	15 months 0% then 14.9%	£0	£0	£2,000
Barclaycard Simplicity	6.8%	£35	£120	£1,010
Credit Card Tarting (2)	0% (rotating cards)	£0	£0	£0
(1) For ease of comparison, ignores minimum payments rules and credit limits (2) needs a good credit score