No sooner has your summer holiday tan faded but it’s time to think about Christmas – at least, the retailers would like you to. Department stores have had Christmas decorations departments open for ages. Of course this is totally insane. Your summer holiday spending has probably only just popped up on your credit card bill, and now you’re thinking about inflicting more pain on it with festive shopping.
Stop right now. I don’t mean to be a Scrooge but Christmas is ages away and frankly, it doesn’t need to be a spending fest anyway (we’ll be doing saving money on Christmas features soon). Before you start Christmas shopping make sure you have at least paid off your summer spending on your card. Interest rates on credit cards are amazingly high – a typical card will have an annual rate close to 20%. If you only repay the minimum each month – usually it’s 1% or £5 – then you will be paying off the debt for ever and pay huge amounts of interest. There are lots of scary calculations here if you need convincing.
If the debt is too big to clear straight away, then you need to take action. If your credit record is good, then you can do a balance transfer onto a 0% deal. Currently you can get 40 months at 0% on cards from Barclays and Tesco – there’s a good guide at www.moneyfacts.co.uk. You’ll have to pay a fee – 1.68% at Barclays, 2.69% at Tesco – for the balance transfer so it’s worth it if you’ve got a large debt. But if you do this, you will have to be disciplined. That means NO adding to the debt with new spending and you need to repay the debt within the 0% period – but 40 months is more than three years so that should be possible. Set up a direct debit for the minimum each month then add on an extra payment each month.
You can get 0% interest on spending cards too (see Moneyfacts again). But if you get one of these, you have to be really disciplined otherwise sooner or later you’ll have another huge debt – in time for next summer’s holiday or Christmas.