Interest free credit cards offer an attractive 0% interest free rate for a set introductory period. This means you get a period of time for which you will be charged zero percent in interest.
The intro rates usually apply to balance transfers although some issuers offer the zero interest rates on new purchases.
The free credit period on purchases typically lasts 3 or 6 months, though some providers offer 0% on purchases for as much as 10 or sometimes 12 months.
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Capital One were the first to launch the 0 per cent introductory offer on its credit card three years ago. Since then many competitors have followed all offering variations.
Anyone who has a reasonable credit history, should be able to obtain 0% interest on purchases. With many cards now offering interest free debt, its all about who gives it you for longer.
If you are disciplined, you can use your free credit period constructively. Different strategies work in different situations, but the key in each case is to make a plan and stick to it. It is also important to realise there are no rate reductions on cash withdrawals.
Some people switch to a 0 per cent rate specifically to make a large purchase such as a buying a car or new furniture, and then use their interest free months of grace to clear the debt in full or part.
When the introductory period ends the rate will revert to the standard APR for that card. At this point most cardholders continue to use that card rather than switching to another 0 per cent offer. It is likely that many cardholders would have not cleared their outstanding balance when the standard APR takes effect, and many more will maintain an ongoing debt from month to month. That is exactly what the credit card companies hope to see and that is the main reason for them offering the zero rate incentive.
However there is nothing stopping you switching cards more than once to spread the repayment over a longer period without charge.
Switching cards frequently to take advantage of more than one 0 per cent deal will not damage your credit rating, but you may find card providers are unwilling to accept you as a customer if you do it too often. Jill Stevens, from credit reference agency Experian, said: "Applying for a credit card and using it for the length of the interest free offer, say six months, then tranferring again so there are two card applications within a year is not abnormal.
Some 0 per cent APR offers apply to new purchases as well as balance transfers, whereas some do not. It is also important to check what interest rate (APR) the card will revert to once the zero per cent period ends.