Both the HSBC credit card and Capital One Platinum card offer 12 months interest free on new purchases, making them your best bet for any upcoming expenditure.
With competitive new purchase credit card deals drying up, these two comfortably beat any others on the market – the nearest rival is Halifax with a 10 month deal, while most others offer anywhere between three and six months.
These credit cards look particularly attractive when you consider the cost of personal loans (your borrowing alternative to credit cards) is soaring, with the average rate increasing by 4.6% in the last year.
We take a closer look at each card.
HSBC credit card
This card comes with a typical APR of 15.9%, which is lower than the average market rate of 17.12%. Aside from the introductory new purchase offer, you also get 2.9 % for two years on balance transfers, with a 2.5% fee.
This is ideal if you need a long time to clear your debt but can’t be bothered switching between the various short term 0% balance transfer deals, but it is extremely important that you avoid switching any money to the card if you plan to spend on it as well. Why? Almost all lenders – with the exception of Nationwide and the Post Office – have an inverse order of payments whereby the debt earning the highest rate of interest is paid off last.
So any repayments you make in year one will go towards your (interest free) new purchases rather than your transferred debt, which will continue to accrue interest at 2.9%. After the first year, the interest rate on new purchases will increase from 0% to 15.9%, meaning it is now the highest interest earning debt.
Any repayments you make now will go towards your transferred debt, leaving your purchases to rack up interest at a rapid rate - and there's nothing you can do about it until you clear that transfer.
As a rule you should never mix balance transfers and new purchases on a card unless both offers are identical, which brings us nicely to the Capital One Card.
Capital One Platinum card
Here you pay no interest on purchases or transfers until May next year, so you don’t have to worry about the inverse order of payments mentioned above (unless of course you make cash withdrawals on the card, which earn interest at an astronomical rate).
The Platinum card was given a dramatic overhaul last week, with Capital One extending both interest free offers by an impressive six months (they previously expired in November). Sadly, the overhaul also included an increase on the balance transfer fee from 1.7% to 3%, while the typical APR jumped a hefty 3% to 12.9%.
Still, it’s a highly competitive card and one you should definitely consider if you’ve got some expenses in the pipeline. One final note, Capital One is only offering this card to customers with an excellent credit rating, so in order to qualify you must:
• Have a credit card with a credit limit of at least £5000
• Have had a credit card(s) for at least five years
• Have never missed more than two payments on a credit card or loan
• Have credit card balances of less than £10,000
• Not have any previous credit defaults (CCJs, current arrears)
If your credit rating is poor, read more about how to improve it here.
