How to survive Christmas credit card spending

By Ariane Buteux

Around this time of year, letterboxes are likely to become inundated with mail from major credit card companies offering spectacular introductionary deals or exciting freebie offers, with recent research suggesting that between October and December 2006 the average UK adult will charge £1,270 to their ‘flexible friend’.

Rather than getting seduced by fancy marketing ploys and trapping yourself in a web of debt, if you’re pretty sure you will be spending on credit this Christmas, make sure you don’t grab at the first card available and instead really investigate what’s about. Depending on the reasons for adding another bit of plastic to you wallet, spending that little extra can actually go a lot further than you might think.

Compare credit cards

Transfer your existing balance

If you already have a balance amount running into the hundreds on one or more cards, you could save yourself money by switching them all to one single one which offers a much more attractive interest rate.

Cards like Marks & Spencers’ &More card and Sainsbury’s Bank Platinum card offer very low interest rates (3.9 per cent and 5.94 per cent respectively) for the life of the balance as well as a fee free transfer over to them. The only thing to bear in mind with these type of cards is that the typical APR on any purchases you make on top of this is 15 or 16 per cent, roughly triple the special balance transfer rate.

Get the most from your credit card

If transferring money to a card with a ‘life-long’ low interest rate on the balance and a fairly low interest rate on the purchases you make, make sure you don’t get caught by excessive transfer fees. Lloyds TSB’s Advance card offers a very competitive 11.90 per cent APR on purchases and 5.5 per cent on balance transfers, but it will cost you 2.5 per cent of the amount you want to transfer over when you come to do so.

Interest free deals

If you are looking to buy your presents on credit before Christmas but intend to clear the balance once you get your wages at the end of the month, then it’s definitely worth making the most of an interest-free offer.

Cards from Sainsbury’s, M&S, Halifax, Mint, Nationwide, NatWest, and RBS all offer 0 per cent interest on purchases for between 9-12 months depending on the card, but bear in mind that the longer the initial 0 per cent period, the higher the standard fall back interest rate tends to be.

Find a best-buy credit card

The Bank of Scotland One and the Co-operative Bank Clear cards both offer a 59 day interest-free period which will take you right through December and well into January, and if you go over this then you will only accrue 9.90 per cent interest on your purchases.

Store cards

The same principles apply to store cards. They typically offer a 56 day interest-free period and an attractive introductionary discount on your purchases of around 10 or 15 per cent which can be really worthwhile, but almost all have a crippling APR in the region of 25 – 30 per cent so be wise and pay it off during the interest free period.

Some supermarkets and larger retailers also offer own brand credit cards which can be useful to make the most of their reward schemes – a good example of this being Sainsbury’s. The supermarket is known for it’s Nectar Reward Card but they also offer a range of Sainsbury’s credit cards, allowing customers to accrue points to then spend on their shopping.

Get the best from your bonus scheme

However a new type of credit card has been launched by American Express and provides Sainsbury’s customers with a new way to save Nectar points by spending money on their everyday shopping. It gives customers the opportunity to earn up to 4 loyalty points for every £1 spent at participating stores which can then be cashed in for luxury treats or money off shopping as part of their Nectar reward scheme.

Get a card with cashback

The final option for credit-happy big spenders this Christmas is a card with a cashback facility. These are a really good option if you are a stickler for paying your balance off in full each month, as you can dodge harsh interest rates while getting something back in return. Companies like Egg, Morgan Stanley and American Express all offer cards with very competitive rates, giving you a rebate of anything up to 3 per cent cashback on the purchases you make with it.

As the credit market is increasingly competitive towards the end of the year when us Brits struggle to cover the cost of Christmas, some cards combine the advantages outlined above so you don’t have to take out 4 different credit cards to address your different financial needs, but still get a fantastic deal to suit you.

One big thing to remember however is that, when committing to a card with free balance transfers, low interest deals or an interest-free period, make sure you are aware of the standard APR. This means that when the special interest-free periods finish or if you spend over a particular limit, you don’t end up feeling the sting in the tail if you have balance left on it.

Most importantly, resist using it to withdraw cash from an ATM as it will cost you an average of £2.50 every time you do so. This means just 4 trips to the cashpoint will cost you a tenner, with the apparent ease of getting ‘free money’ causing your well-planned finances to spiral out of control.