Cutting the cost of Christmas credit

Christmas shopper

As Christmas approaches, now is the time to get your finances in order ahead of the seasonal shopping spree. Most of us rely on some form of credit to get us through the big Christmas spend. We look at ways to keep this credit as cheap as possible.

Unfortunately, when it comes to Christmas shopping most of us turn to the most expensive form of credit available to cover costs – the credit card.

While credit cards provide a quick and easy way to get over the Christmas shortfall, with interest rates of almost 20 per cent there is nothing merry about the bills that will arrive in January.

However, if you act fast and switch credit card provider now you could save yourself hundreds in interest repayments. Credit card applications usually take at least four weeks but may be delayed further as demand increases in the run up to Christmas so time is running out.

Rob Kenley, head of credit cards at moneysupermarket.com, said: “Credit cards offer a simple way to help spread the cost of Christmas when used correctly. However, people need to ensure the card they apply for is not going to end up costing them more than they can afford.

“Taking the time to shop around for cards now will ensure people have the right card when they hit the shops. Opting for a 0 per cent deal means consumers using plastic for their Christmas spending pay nothing more than the cost of their goods – they just need to make sure the balance is paid off before the introductory offer ends.”

There are some excellent introductory offers available. For example, Halifax offers 15 months interest on purchases, which would cover you for the next two Christmases.

However, be aware that if you are transferring your balance from your existing lender to your new lender you will probably be liable to pay a fee. Halifax charges three per cent, but this will vary from lender to lender.

When you are choosing a new credit card, make sure that it offers a competitive interest rate when the introductory offer expires.

Once you arrange your new credit card, you can do your Christmas shopping with the peace of mind of knowing that you will not be hit with extortionate interest repayments in the New Year. However, the golden rule is to only borrow what you can afford to repay within the interest free period.

If you are one of the few who has budgeted for Christmas and will not be relying on your credit card to get you through, you should consider a cashback credit card. These offer money back for every pound you spend with the credit card, usually in the region of one per cent. However, these are only worthwhile if you pay your bills in full and on time every month.

While credit cards offer by far the most popular method of raising extra cash for Christmas, they are not the only option. You could also consider a personal loan which will offer a much lower rate of interest than a credit card.

Alternatively, you could check to see if your mortgage provider will allow you to take a repayment holiday in December. This, too, would offer a low interest rate option.

Although Christmas is still two months away, now is the time to consider your finance options. With a little thought and preparation you could save significantly on the cost of Christmas credit.

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