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How to play #creditcards at Christmas without going into the red

christmas presentsOverspending at Christmas can result in a debt hangover in the New Year. A hefty credit card bill could spoil January – and even the months after if you don’t clear the debt. But there are sensible ways to plan your spending at Christmas. For starters, you need to make sure you’re using the best payment method.

You’ve just about got time to apply for an interest-free on purchases credit card. According to comparison site Defaqto, the longest interest-free period on a credit card is currently 31 months - Sainsbury’s Nectar Purchase credit card. Halifax, Post Office Money, Santander and Tesco all have 30 month interest-free on purchases.

However, there’s a big warning klaxon here: interest free offers only work if you pay off ANY outstanding balance by the end of the 0% period. If you don’t then you’ll end up paying interest on your debt. On the Sainsbury’s deal, for example, the rate once the 0% deal is over is 18.9%. If you get one of these cards (and you’ll only get one if you’ve got a good credit rating) then you MUST make a note to remind yourself to clear the debt in advance.

I’ve not had an outstanding debt on a credit card for many years. But I do use my main card – the John Lewis Partnership one – for spending and I clear the balance every month by direct debit from my current account, topping that up with savings if I haven’t got enough cash in it. I do this rather than use a debit card or cash because I get John Lewis gift vouchers based on my spending – one point for £1 spent in its stores or £2 elsewhere.

Currently the best cashback deal is probably the American Express Platinum Cashback Credit Card. It gives 5% cashback for the first three months, with a maximum payout of £125, which then reverts to 1%. This makes it worthwhile if you’re planning some expensive present shopping, but only if you pay off your monthly bill in full. Otherwise the benefit is outweighed by the cost.

But here’s a novel idea: why not use banknotes to pay for presents? If you don’t trust yourself not to build up a debt, then don’t use a credit card. And even if you’re going to use a debit card, you could get carried away and end up in the red. So why not draw cash out of your account and spend that? You’ll keep to a budget and won’t be worrying about piling up interest: you might even enjoy the discipline of shopping with a limit on what you spend.

See our SMM guide to credit cards here.

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Thursday, 13 December 2018