The guidance on this site is based on our own analysis and is meant to help you identify options and narrow down your choices. We do not advise or tell you which product to buy; undertake your own due diligence before entering into any agreement. Read our full disclosure here.

0% credit cards v cheap personal loans: Which wins for cheap borrowing?

With interest rates rising, there are fears cheap borrowing will soon be a thing of the past. Thankfully however, if you need to borrow, there are still options available (for now).

So, which wins for cheap borrowing? A 0% credit card or a cheap personal loan? Let’s explore the pros and cons…

Why cheap borrowing is unlikely to be around for much longer

Before we dive into the question of whether it’s better to opt for a 0% credit or a cheap personal loan, it’s worth appreciating where we are right now with the global economy, and how current issues are likely to impact borrowing costs going forward.

In brief, interest rates around the world are rising quickly, with the US Federal Reserve leading the pack. The US central bank has already hiked interest rises on several occasions this year in an effort to ward off rising inflation across the pond. The behaviour of US Federal Reserve has a massive impact on other central banks around the globe – including the Bank of England – as the US dollar is the world’s reserve currency.

This ‘reserve currency status’ is important as it gives the US huge power on global monetary policy. When the US Federal Reserve hikes domestic interest rates, it puts pressure on the Bank of England to follow suit. If it doesn’t then the pound usually suffers, especially against the dollar. We have already seen the pound slide in 2022.

Because the Bank of England is keen to avoid the pound falling any further, it really has no choice but to continue raising interest rates—not only to support the pound, but also to tackle the UK’s soaring inflation rate.

Higher interest rates can massively impact the cost of borrowing. This is because higher interest rates makes it more expensive for banks to lend money, which is why we’re currently seeing mortgage rates edge up.

While 0% credit card deals and cheap personal loans haven’t been pulled from the market in huge numbers, it’s very likely this will soon be the case. Money simply isn’t ‘cheap’ anymore. This all means that if you do need to borrow, it’s probably best not to hang around…

0 % credit cards vs cheap personal loans

While cheap borrowing deals are still out there, let’s take a look at the difference between 0% credit cards and cheap personal loans.

0% credit card must-knows

A 0% credit card allows you to borrow at no cost. Because of this, there’s no cheaper way to borrow. However, before you rush to apply for one of these cards, there are several ‘must-knows’ to bear in mind.

1. The 0% length

A 0% credit card will only allow you to borrow interest-free for a set period. After a card’s 0% period ends, the non-promotional rate of interest will apply which can be very expensive. To avoid having to pay it, ensure your card isn’t carrying a balance when your 0% term ends.

2. Your credit limit

When you get a 0% credit card you’re given a credit limit. Often it’s not possible to discover what limit you’re given until after you apply. Whatever the limit, you must ensure you don’t bust it. If you do, you could lose your 0% deal. It’s worth knowing that some 0% providers will increase your credit limit over time.

3. The need to repay at least the minimum each month

If you've 0% card you have to make at least the minimum repayment each month to keep the card interest-free. The easiest way to do this is to set up an automatic direct debit when you apply.

4. The need to undergo a credit check

When you apply for any type of credit you'll have to undergo a hard credit search. This will have an impact on your credit file. One or two searches is usually no biggie, but several in a short space of time is usually best avoided. For more on this, take a look at our article: Hard Credit Search vs. Soft Credit Search: what's the difference?

5. You shouldn't withdraw cash (unless you’ve a money transfer card)

If you withdraw cash on a 0% purchase credit card it’ll rarely be interest-free. That’s because 0% periods typically applies to spending made on the card.

If you do need cash, then you may wish to go for a 0% money transfer card. These cards allow you to shift cash from them to your bank account — up to your credit limit. However, a fee will almost always apply which is typically between 3 and 4%.

Unfortunately there aren’t a host of money transfer credit cards available. Plus, the 0% lengths on these cards aren’t as generous as those offered on 0% purchase credit cards.

0% credit cards available right now

Right now, the longest 0% purchase credit card available is from Barclaycard, which offers up to 25 interest-free months. However, some poorer credit scores may be offered just 12 months at 0%, or simply be rejected for the card. (22.9% rep APR).

The next-longest card is from M&S Bank which offers 24 months at 0%. You’ll either be accepted for this card or rejected — you can’t be offered fewer 0% months than the headline rate. (21.9% rep APR).

If you’re looking to shift cash to your bank, then MBNA offers a money transfer card with an interest-free period of up to 18 months. The card charges a 2.99% or 3.49% fee—depending on your credit score—on anything you transfer to your bank. (22.9% rep APR).

Cheap personal loans must-knows

Cheap personal loans are pretty much self-explanatory. They’re offered by dedicated providers, and can lend you cash for a set period of time. In return, you’ll pay interest on the amount you borrow.

Generally, the more you wish to borrow, the lower the interest rate. This means that it can sometimes actually be cheaper to borrow MORE than you need, if the amount you borrow puts you in a tier that qualifies for a lower interest rate.

Just like with credit cards, when you apply for a personal loan you’ll have to undergo a credit check. This will be used to determine your eligibility for a particular loan. It may also determine whether you’re given the headline interest rate. That’s because interest rates on cheap personal loans are only representative. This means you could apply for a cheap personal loan and be offered a higher interest rate than the one advertised.

Cheap personal loans available right now

If you’re looking for a cheap personal loan, you’ll need to determine how much you wish to borrow, and for how long for.

If you’re looking to borrow between £3,000 and £5,000, then MBNA offers 8.3% rep APR.

Between £5,000 and £7,499 Sainbsurys Bank is the market leader. It offers 4.5% rep APR, or 4.3% rep APR if you’ve a Nectar card. If you do have a Nectar card, then you can borrow up to £15,000 with Sainbsurys Bank at 4.3% rep APR.

Should you go for a 0% credit card or a personal loan?

Before deciding on whether you should go for a 0% credit card or cheap personal loans it’s worth thinking about whether borrowing is right for you in the first place.

As a general rule, you should only borrow for a planned purchase that you’ve budgeted for. You should also only ever borrow if you know you’ll definitely be able to repay your debt. If there’s a chance you won’t, there’s a risk your debts will become unmanageable in future.

However, if you do NEED to borrow, then opting for a 0% credit card or a loan should probably depend on the amount you wish to borrow. If you’re looking for borrow only a small amount, then it’s likely a credit card is the cheaper option. That’s because interest rates on personal loans can be high if borrowing under £3,000 or so. Even if you need cash transferred to your bank, a 0% money transfer card may still be cheaper for low amounts — even if you have to pay a fee.

If you need to borrow a large amount, then a cheap personal loan is probably more appropriate. That’s because credit card providers are usually reluctant to offer cardholders a five-figure credit limit. Because of this, a cheap personal loan may actually be your only option if you’re looking to borrow a considerable sum.


The guidance on this site is based on our own analysis and is meant to help you identify options and narrow down your choices. We do not advise or tell you which product to buy; undertake your own due diligence before entering into any agreement. Read our full disclosure here.