Cashback credit cards
With a cashback credit card you can earn money when you spend – but you must clear your balance in full each month. Using a card that rewards you for spending means that your January sales shop effectively costs even less than the discounts you see on the price tags.
What’s more, now is the perfect time to take action as MoneySupermarket is offering the chance to receive an extra £25 cashback within two months of applying for an American Express Platinum Cashback card via the site.
While you still have to pay the £25 annual fee for the card upfront, the additional cashback means you effectively get the card - which can earn you up to 2.5% cashback on your purchases - free for the first 12 months.
What's the deal?
While very competitive, the Amex Platinum Cashback card does not offer the highest rate of cashback on the market at the moment.
In fact, it is ranked second in the best buy tables, after the Santander 123 Cashback Credit Card, which pays up to 3%.
But despite the slightly higher headline cashback rate, this is not necessarily a better choice for New Year sales shoppers than the Amex card.
This is because the maximum 3% rate is reserved for those buying petrol. Purchases in department stores and supermarkets, where many of us will find ourselves hunting down the January bargains, are limited to 2% and 1% cashback respectively under the terms of the deal.
The terms of the Amex deal, on the other hand, mean that you can earn the introductory rate of 2.5% on all your January sales and food shopping, up to a maximum cashback limit of £100.
What's more, the Santander card also has a £24 annual fee, while MoneySupermarket users can get the £25 Amex card back thanks to the exclusive extra cashback offer described above.
The cashback rate paid by the Amex card falls to 1.25% after three months, meaning that you will probably need to apply for a different cashback card by the time the January sales of 2013 comes around if you want to benefit from higher cashback rates.
It is also important to avoid missing any monthly payments as the Amex card's representative APR is 14% (variable) or 18.5% (variable) for those who pay the £25 annual fee.
Missing just one month could therefore easily cost you more than you have saved by earning cashback on your purchases.
This is even truer for the Santander card, though, as it has a steep representative APR of 22.8% (variable) once the £24 annual fee is taken into account.
If you're planning on hitting the January sales armed with a credit card, and are vigilant in clearing your balance in full every month, then using a card that offers cash rewards when you spend is a no-brainer.
And given the restrictions imposed on the market-leading card from Santander, the best card for this purpose is undoubtedly Amex Platinum Cashback - unless you are a car owner looking for longer-term benefits.
However, you must ensure that you pay off what you spend in full every month to avoid incurring interest charges that will quickly wipe out the benefits afforded by the cashback.
If you are planning to apply for a cashback card in time to use it for 2012 sales shopping, it is vital to do it now as it can take some time for the application to go through.
Even if you don't get your cashback card in time, if you're planning on booking your summer holiday early in the New Year, there is still the potential to earn sizeable cashback.
Remember that the best credit card deals always require you to have an excellent credit history, and if you want to apply for the Amex card, you must have a household income of at least £30,000.