Get your Christmas credit card

Published:: 02 October 2008
Topic:: News,Money,Credit Cards

It's likely to be a tough Christmas for many this year. With many households struggling to cope with the impact of higher living costs, money is tight. And with borrowing costs rising, this is not the time to fund Christmas by getting into debt. That said, there are some great 0% credit card deals available which could help you spread the cost of Christmas if you don't have enough saved to cover everything.

However, it takes around a month for credit card applications to be processed so you need to apply for a new card now if you want to receive it in time for your festive shopping trips.

So which credit cards are best for Christmas spending?
If you are looking to spread the cost of Christmas because you can't afford to pay for everything upfront, consider a card that offers an interest-free period on purchases.

The Capital One Balance Transfer Exclusive - which is only available through moneysupermarket.com - has the longest 0% purchase offer on the market. Its 0% period runs until November 1 2009 at which point it reverts to a typical rate of 15.9%. This means that by the time you start your Christmas shopping you'll have the best part of a year to pay off the balance.

Another advantage is that this card offers the same 0% period on balance transfers, albeit with a balance transfer fee of 3%. So if you have existing debts on another credit or store card you could move it over to the Capital One Balance Transfer Exclusive and not pay any interest until November next year.

If you do have a debt on another card that you plan to transfer over, it's vital to ensure the 0% purchase and 0% balance transfer offers are equal - otherwise you'll accumulate interest on the original balance as soon as its 0% offer ends. This process is known as 'negative payment hierarchy' and is explained in more depth in our article 'the interest-free credit cards that may charge you interest'.

There are plenty of cards available that offer equal 0% periods. These include the Capital One Platinum Exclusive - another card that can only be found at moneysupermarket.com - which offers 0% until September 1 2009 with a lower typical rate of 12.9% and a balance transfer fee of 3%. The Bank of Scotland Credit Card and the Halifax One Online Special both offer 0% for 10 months on purchases and balance transfers with a typical rate of 15.9% and a balance transfer fee of 3%.

If you don't have an existing balance to transfer then your only concern should be finding a lengthy 0% purchase period. This could make the likes of the Barclaycard Breathe, with 0% on purchases for 12 months and a typical rate of 12.9%, or the First Direct Gold Card, with 0% on purchases for 12 months and a typical rate of 16.9%, appealing options.

If you think you will need longer to repay your debt or are considering taking out a personal loan, a low standard rate card may be worth considering. The Barclaycard Simplicity is the market-leader in this category with a rate of 6.8%, followed by the Capital One Low Rate Card at 8.5%. While the rate on the Capital One card is slightly higher it is fixed until August 2012 - the Barclaycard has a variable rate so it could increase at any time.

Spend money to make money
If you are in the fortunate position of being able to clear your balance in full each month, then you don't need to worry about 0% offers as you won't pay any interest. However, it's still worth applying for a new card as a number of products reward you for spending.

For example, the American Express Platinum Cashback Card offers 5% cashback for three months, up to a maximum of £4,000. Once the introductory period has ended, you earn 0.5% on the next £3,500 you spend, 1% on spending between £3,501 and £10,000 and 1.5% on any spending above £10,001.

Alternatively, you could opt for a card that gives you loyalty points. These can be useful if you shop regularly in a particular store such as Marks & Spencer (M&S), or Tesco. The M&S credit card, for example, enables you to earn points which are exchanged for vouchers every time you spend on the card, and you earn double points for any spending in M&S. While the Tesco Clubcard credit card enables you to accumulate extra clubcard points if you pay on credit. This means you'll accumulate more vouchers for discounts off your weekly shop.

Remember however that these cards should only be used if you are sure you can pay off the balance in full each month - otherwise the interest you are charged on the outstanding debt will far outweigh the value of the reward. The American Express Platinum Cashback Card for example, charges a typical standard rate of interest of 18.9%.

What if you don't qualify for the leading deals?
The leading rates and 0% offers are only available to those with good credit scores - if you're unsure about your credit rating use our Smart Search tool to find deals you're likely to qualify for based on an assessment of your credit profile. Don't make unnecessary credit applications because any rejections will have a negative impact on your credit score, making it even harder to get accepted for credit.

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