Let’s be clear on one thing. Borrowing money to pay for Christmas presents isn’t a good idea if you pay interest on that debt. But actually, credit cards can make Christmas cheaper as long as you have the right card. Given that it’s less than three months to Christmas, if you want a new credit card then you need to apply sooner rather than later. Here’s how to be clever with cards and make them work for you.
1. A smart way to finance Christmas presents is to use a credit card which gives you cashback or benefits on your spending. Currently the best deal is probably the American Express Platinum Cashback Everyday card. This gives you 5% cashback on your spending for the first three months capped at £100 (more details here).
2. You boost this even more by buying via a cashback site such as Top Cashback* or Quidco. They work like this: you register, then whenever you want to buy something online, go via the site and click through. You then get a percentage of your purchase back at a later date. Currently on Top Cashback* there’s up to 6% cashback at Debenhams. I’m registered on both sites: it’s really easy, honestly.
3. So then you’ve got two bits of cashback – from the card and from the website. Excellent.
4. But ... it can go wrong. Firstly, to get any credit card you’ll be credit reference checked. Without a good record you’ll find it hard to get the top deals. But let’s assume you get the card: this clever plan can still go wrong. If you don’t clear the balance every month and build up a debt instead then the interest you’ll pay will more than likely wipe out the benefits. For example, the Amex card mentioned above has an APR of 22.9%.
5. And another problem: we’re all human and Christmas can test anyone’s budgeting intentions. If you think you will end up not being able to pay back the full amount each month, then you don’t need a card with benefits but one with a low (or no) interest rate on spending. Moneyfacts lists Sainsbury’s Dual Offer card as a top deal. It has 0% interest for 29 months on balance transfers AND purchases.
6. Twenty nine months is a long time. But you still need to make a note of when the zero interest period expires. After the, the APR on the Sainsbury’s card is 19.9% - that’s a big jump from 0%. If you get a card with a 0% period, then use that period to clear your debt. And again, with this card you’ll probably need a good credit record for your application to be successful.
7. What about if you’ve ignored all the above and it’s January and you have a massive debt on your card? You’ll need a 0% balance transfer deal such as the Sainsbury’s one above or Tesco Clubcard Credit Card for 36 Month Balance Transfer which kind of does what it says on the card. There’s a fee if you move a balance over – with the Tesco card, 2.69% (so that’s £26.90 for a £1,000 debt) and again, you MUST use the 0% period to clear your debt.
You’re on your own with finding the best Christmas cards though...
And see our guide to credit cards here.