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Low interest credit cards – are they right for me?

Credit cards used to be available only to the wealthiest members of society. But over the decades, lower interest rates and a broadening of the market have made them available to millions of ordinary Britons. With interest rates now as low as zero per cent for over two years on many deals, you might be wondering whether it’s a good idea to take one on. Here’s a quick overview to see if they’re right for you.

How low can you go?

Realistically, interest rates will never go below zero per cent (i.e. lenders paying borrowers to borrow!), so the competition among credit cards is now based around the duration of the 0% deal and any other perks that come with the cards.

It is important to note that some 0% deals are cheaper than others. For example, there are balance transfer fees which vary from lender to lender. And some have 0% interest on transfers but charges on purchases. Look at the small print if price is your main deciding factor.

Will I qualify?

Because 0% credit cards are more of a risk to lenders, the bar for acceptance may be higher than other cards. To qualify, you’ll generally need to be in full-time employment and earning a certain amount, and you’ll need to get a certain score from the credit reference agency. The exact figures are not in the public domain, so the only way you can find out if you qualify is to apply or use an eligibility checker to give you an idea if you will be accepted.

Can I stick to the repayments?

The reason the credit check is carried out is to make sure the borrower has the ability to repay the card, and also that they have a history of good debt management. You’ll need to be disciplined enough to ensure you have enough cash budgeted each month to pay at least the minimum payment, but preferably several times more to clear your debt before interest is added.

Remember, failure to meet repayments on time will not only cost you fees – it might also invalidate the 0% deal you have many months earlier than planned, and your card will become just another credit card with monthly interest charges from that moment on.

Why am I borrowing?

There are many good reasons for taking on a 0% credit card. You might like the convenience of being able to pay with a single card and keep track of your purchases. Or you might want to make large purchases and spread the cost over several months without being charged interest.

But there are also bad reasons. If you’re finding that you’re struggling to make ends meet because your outgoings exceed your income, it’s important that you don’t try to borrow your way out of trouble. Debt is debt, and it needs to be paid back, even if you’re not paying interest on it. Suddenly having an extra thousand pounds at your disposal can feel like a massive relief when you’ve got financial troubles, but you really need to tackle to underlying causes.

If you need truly independent advice about debt, try Citizens Advice Link opens in a new window and the National Debt LineLink opens in a new window.

Money transfer cards with 0% interest can work out cheaper than maintaining an overdraft. Some banks’ overdraft fees can cost upwards of £50 every month if you spend ten days or more in the red. Paying off your overdraft with a 0% money transfer card and then repaying the card over 12–24 months in a controlled way can help you to clear your overdraft, and as long as you don’t slip back into the red, you’ll be better off.

There are other situations when a credit card could help – for example if you’re paying higher interest on other credit or store cards. Transferring these balances to a lower rate card may help but check you’d still be better off even with the transfer fees you would need to pay.

Over to you

Virgin Money doesn’t want our customers to take on debts that will cause them financial problems, so we urge you to make sure you’re not taking on a credit card if you think you might struggle to pay it back.

If you’re ready to apply, find out if you’re eligible using our Card Checker.