Focus on: Exclusive six-month 0% on purchases with Capital One

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Published:
29 March 2012
Topic:
News,Money,Credit Cards,Product review

Capital One is offering an exclusive credit card deal through MoneySupermarket, which gives customers looking to build up their credit score the kind of interest break typically reserved for those with best credit scores. We take a look at the small print to see the card could work for you...

What's the deal?

Capital One's Classic card is offering 0% on purchases until July 2012, exclusively through MoneySupermarket.  Plenty of credit cards offer 0% on purchases - and for longer than the next four months - but this is different, as the Classic card is classed as a credit builder card.

This means it is suitable for applicants who have either had minor credit problems in the past, or no history of borrowing at all. In either case, they would be likely to be turned down for mainstream credit card, which 0% deals are usually reserved for.

Any catches?

Because it is aimed at borrowers with an under-par credit score, Capital One's Classic card comes with a high representative Annual Percentage Rate (APR) of 34.9% (variable). This compares to the average 17.32% according to Bank of England figures. Credit limits are also lower, starting at £200 with a cap of £1,500.

The 0% deal also only applies to purchases - you will not be able to transfer an existing balance across.

The Capital One Classic card is also not designed for people with any major credit problems. For example, if you have been declared bankrupt in the last 12 months, you will not qualify.

Finally, bear in mind that the quoted APR of 34.9% is also representative, which means it only needs to apply to 51% of applications that have been accepted - yours could be much higher. Furthermore, it assumes a credit limit of £1,200, so if yours is different to this, again a higher APR could apply.

What's the verdict?

If you have a less-than-perfect credit score, are looking to make a large purchase and split the cost into four monthly payments, this could be the ideal card for you. After all, it's the only credit builder card that offers any 0% deal on purchases at all.

However, if you are taking the card for general spend and have no means to clear the monthly debt, it's probably not a good idea. Even the representative APR of 34.9% would be crippling if it was to apply to any balance outstanding after the 0% purchase period comes to an end. You could not only find yourself in debt, but damage your credit rating further.

On the other hand, as with any credit builder card, if you pay off your balance monthly, the Capital One Classic card can actually help you rebuild your credit rating. This will see you gradually qualify for more mainstream credit card offerings, the best of which can offer up to 15 months of interest-free purchases.

If you do think you will be accruing a balance on your card that will be hanging around after July when Capital One's 0% deal on purchases comes to an end, it will probably make sense to opt for a credit builder card that comes with a better rate.

For example, the Aquis Visa credit card comes with a lower cheaper representative APR of 29.8% (variable) with a starting credit limit of up to £1,000. However, in relative terms this rate is still very expensive and accruing a balance should be avoided at all costs.

Top tip

Of course, you will want the best credit card that your personal credit score will allow. But, applying and being rejected could have the effect of damaging your credit score further. By using MoneySupermarket's SmartSearch tool you can carry out a 'dummy application' and find what cards you're likely to be accepted for first, without affecting your credit file at all.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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About This Author

Laura Howard

Content Editor, Money and Lifestyle

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