How to improve your credit score and avoid paying interest

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If you're planning on putting your Christmas spending on the plastic this year, there are some great interest-free deals to be had on both new purchases and balance transfers.

The trouble is, if your credit score is less than perfect, you've little chance of being accepted.

And if you want to re-build your credit score, you'll most likely have to take out a no-frills credit card, with no introductory offers and relatively high annual interest rate.

Until now, that is. MoneySuperMarket has teamed up with Captial One to offer an exclusive dual-purpose credit card – ideal if you're looking to build your credit score and need some added spending power to cover Christmas.

What's the deal?

The Capital One Classic Complete credit card offers four months at 0% interest on both purchases and balance transfers – so even if you don't get the card in time to do the Christmas shopping, you could always put your spending on your existing plastic and then transfer the outstanding across to the Capital One card in the New Year to take advantage of the interest-free offer.

If you are looking to transfer a balance, you'll have to make sure you shift the debt as soon as possible once you've been accepted for the card as the interest-free period is only open for four months from the date your account is opened.

So, if you wait a month, for instance, to make the transfer, you'll have just three months at 0%.

It's important to note that balance transfers are subject to a 3% transfer fee, so if you transfer £1,000 you'll be charged £30 for the privilege. And once the interest-free period is up, interest is charged at a representative rate of 34.9%.*

What are the catches?

The card is designed for people with an average to good credit score, so could be ideal if you've missed a couple of debt repayments in the last 12 months.

If you're application is successful you'll be offered a credit limit between £200 and £1,500, depending upon your individual circumstances and credit score.

If you've a poor credit score and have had any defaults or county court judgements (CCJs) in the last 12 months, you should look elsewhere.

Similarly, it's not worth applying if you've never previously had a credit card as you'll need to be able to show you at least have some history of managing your credit.

And make sure you make the monthly payments on time as failing to do so will not only see the interest-free offer withdrawn, it could also damage your credit rating further.

You'll also pay a hefty 34.9% APR representative once the introductory periods finish, so it's vital to clear your balance in full each month if you can.

To apply, you must be aged 18 or over and be on the electoral roll. And it's worth noting you won't be able to transfer a balance from an existing Capital One credit card.

What are the alternatives?

If you're after a credit builder card that comes with an introductory 0% period on purchases, the Barclaycard Initial with Purchases offers three months' interest-free and £20 cashback.

Once the three months is up, annual interest is charged at a representative rate of 34.9%** (variable), and this is the rate you'll pay on balance transfers, which are also subject to a 2.99% fee.

If you've never had a credit card before, it might be worth checking out the Marbles Classic 24.8. This card comes with a representative APR of 24.8%*** (variable), which is lower than most other cards of its type.

It doesn't have any introductory offers though, and balance transfers are subject to a 3% fee and a representative APR of 39.94% (variable), so best not to balance transfer on to this card.

You can compare a full range of credit builder credit cards at MoneySuperMarket.

Whatever card you take out, try to make sure you pay of the balance in full at the end of each month, if you don't then interest repayments can soon add up and make it more difficult to pay off what you owe.

*Representative Example: If you spend £1,200 at a purchase interest rate of 34.9% p.a (variable) your representative rate will be 34.9% APR (variable)

**Representative Example: If you spend £1,200 at a purchase interest rate of 34.9% p.a (variable) your representative rate will be 34.9% APR (variable)

***Representative Example: If you spend £1,200 at a purchase interest rate of 24.8% p.a (variable) your representative rate will be 24.8% APR (variable)