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Have a credit-savvy Christmas

Have a credit-savvy Christmas

Category: Credit cards

Updated: 27/11/2015
First Published: 24/11/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

In exactly one month's time we'll be sitting around the Christmas tree, preferably with a glass of mulled wine in hand, waiting patiently (or otherwise) for the big day to get here. The question is, are you ready? If not, we thought we'd run through how you can get organised by using a trusty credit card.

We know that using credit to pay for Christmas is never ideal, but if you haven't managed to build up a suitable savings pot, you may find it difficult to cover the costs. After all, for many of us there's only one payday left until the main event, and with American Express predicting that the cost of Christmas could be a whopping £1,500 this year, it could be just about impossible to rack up the necessary funds in time.

However, as long as you go about it the right way, there's no reason why you can't use a credit card as a fallback – and if you stay credit-savvy, you won't be feeling the financial hangover in the New Year either! There are several rules you need to remember if you're going to make this a success, however, so get ready for Christmas spending the right way.

The key to success

When it comes to Christmas credit (or any form of credit, for that matter) the key is to make sure you can comfortably afford the repayments while paying as little interest as possible. Preferably, you want to avoid racking up any interest at all.

While this can be easily done if you pay the balance off in full each month – perhaps if you only use your card for the odd purchase, or for everyday spending but then use your paycheque to pay it off – it may not be quite so easy if you're using it as your Christmas fund. After all, the whole point of turning to credit is because you haven't got sufficient funds to cover your festive spending – but all is not lost.

This is where 0% interest credit cards come in.

Credit cards that charge 0% interest on purchases for a limited period can be a godsend at this time of year. Quite simply, they mean you can put everything on your card without accruing any interest for the specified term – in some cases for as long as 27 months – so you've got plenty of time to pay off the balance before the deal comes to an end. Pay it all off in time and you won't have incurred any interest whatsoever, giving you a way to spread the cost of your festive spend without paying more in the process

The key to making this happen is to do a quick calculation. Once you've bought all your festive goodies, stop spending on the card and make a note of the total. Then, divide that by the number of months the 0% interest deal is on for, and voilà – you know how much you need to pay off each month to clear the balance by the end of the introductory term and avoid interest!

Ideally, you need to pay this amount every single month to be certain you'll clear the balance in time, but at the very least, make sure that you cover the minimum payment, or the introductory deal could be cancelled and you'll start being charged interest. Make sure you don't use this card for cash withdrawals either, or for spending abroad, as these transactions won't come under the same 0% interest bracket.

Make the most of your spending

Another possibility is to look at cashback credit cards that will reward you every time you shop. Generally speaking, these cards will put a proportion of your spend straight back into your pocket, either by reducing your balance or giving you (for example) vouchers, points or rewards of some kind.

The best deal on the market is currently from American Express, which gives you 5% cashback on all spending for the first three months – perfect for all that Christmas shopping – capped at a maximum of £125. So, if you put all your festive goodies on this card, you could get a nice little chunk of it back!

But, these aren't 0% interest cards and are really only suitable if you can afford to pay the balance off in full each month, otherwise the interest will outweigh the benefits of any cashback earned. They're ideal for those who have perhaps saved up a decent amount in advance, however – rather than spending on your debit card, simply buy your goods on a cashback credit card and use your savings to pay it off.

What Next?

Could credit come in handy in the next few weeks? Then compare the top credit cards to get started.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.