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Your Money > Credit Cards Articles > Christmas credit card...
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By Sarah Modlock Of all the weird and wonderful things that appear on Christmas wish-lists, I bet Santa never gets requests for 'more debt'. But that is exactly what millions of credit card users will get. New research shows that we are set to spend more than Men are leading the way when it comes to spending this Christmas, shelling out a quarter more then women (£1,417 compared to £1,131). The biggest area of spend for men is on the home and car (£402 on average), whilst the priority for women is on groceries this Christmas (£312). So Mum's gone to Iceland (when will they make those adverts stop?) and Morgan Stanley says that's a good thing. 'People are increasingly comfortable with using their credit cards to buy everyday items such as groceries, as well as for larger purchases like their Christmas gifts,' says marketing director Patrick Muir. 'Cardholders are also becoming increasingly savvy when it comes to being rewarded for the purchases they make and with a raft of schemes available, from collecting points to cashback, spending on credit cards is becoming more appealing than paying by other methods,' he adds. Make sure that your getting the best credit cards deals But here's the thing: most people will not be repaying their credit card debt in full and many will not have cashback cards, making Christmas a loss leader. One third of credit card users has three or more cards and one in seventeen has five or more credit cards in their wallets according to MoneyExpert. 'The British love affair with credit cards continues,' says MoneyExpert.com's Sean Gardner. 'It is healthy if people are switching cards and clearing debts but they are kidding themselves if they rely on moving from one card to another just to avoid repaying their debt. Long zero per cent credit card deals are attractive for a variety of reasons and consumers shouldn't be afraid to take advantage of them. But the number one rule is only borrow what you can afford to pay back. The problem is at Christmas time that's a very difficult rule to follow.' he says. What's on offer? Ideally, we would all learn to budget for Christmas - it's only been in the diary for a couple of thousand years, after all. Failing that, at least use plastic in way which will benefit you more than them. It's too late to switch cards now but there are plenty of options for the New Year, depending on how you spend and how you repay. If you carry a balance... Switch between issuers to take advantage of interest-free balance transfers but bear in mind that many cards now charge a fee for the transfer. Yes, really. Most transfers last for up to nine months but you can also find cards offering low balances of about 3% interest for the entire life of the balance. Make sure that the new card also has a competitive APR (annual percentage rate) for ongoing purchases. Finally - and this is crucial - close the account for the old card and cut it up so that you will not be tempted to run up more debt. HSBC's MasterCard charges a 2% transfer fee and you pay 0% until 1 January 2008. APR on purchases is 15.9%. The GE Money Transformation MasterCard charges a 2.5% transfer fee and you pay 0% on the debt for 12 months from date of transfer (whereas with the HSBC card, the date is fixed). The APR for purchases is also lower at 12.9%. Compare rates for balance transfer Credit Cards Compare rates for purchase Credit Cards If you would like to transfer the balance for life then consider Marks & Spencer's &More MasterCard where you pay 3.9% on the transferred debt until it is cleared although you must transfer the debt within six months of getting the card. There is no transfer fee and purchase APR is 16.9%. You can also enjoy 0% interest on all shopping everywhere for 12 months from date of account opening and earn &More points on every card spend to use when you shop at Marks & Spencer. If you clear your balance in full every month..... If you are strict about your credit use then you can benefit from a cashback credit card where, for every pound you spend, the credit card issuer will give you some money back, usually after 12 months. Over special periods such as Christmas, some credit cards have been known to offer double cash back. The value of the percentage can vary depending on issuer. But remember, if you pay your bill late, or carry some credit even for one month, then you may find that the value of the cashback is far outweighed by the cost of interest, especially as the APR on these cards tends to be high. American Express Blue Amex gives 0.5% if you spend £3,500 in a year. This rises to 1% on annual spends of £3,501 and more. Purchase APR is 12.9%. Alternatively, the Egg Money card gives a standard 1% cashback. This is currently guaranteed until 31 January 2007 so you may want to see what they are saying in the New Year. The purchase APR is a low 7.9%. Another way to make your money work harder if you pay off your balance, is to opt for a card with a long interest-free period. With most credit cards, if you go out shopping on the day after you receive your latest statement, then you will not be billed for your purchases until the same time next month and payment will not be due until three to four weeks after that. This can amount to an interest-free period of around 59 days, but it can be as short as 45 days. If you are going to clear your balance each month, then the longer the interest-free period, the better. Source: Moneyfacts.co.uk. All details correct as at 12 December 2006. And finally.... Stay away from store cards. I say again, stay away from store cards. You don't need them and they do nothing but suck your finances dry. Useful links: |
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