All you need to know about using a credit card this Christmas
The festive season is not only a time to eat, drink and be merry but also for spending! Christmas can be an expensive time of year as there are many costs to cover. If you’re looking to use a credit card to spread the cost of Christmas, Ella Jukwey explains how to be a savvy spender.
Why do people use credit cards during Christmas?
Research from Finder has revealed almost 23 million Brits are planning to use credit cards for their Christmas spending this year. Many people rely on credit cards during this time of year as it allows you to buy something immediately but make the actual payment later. The breathing space paying for items using credit gives you can be handy during the Christmas period when there are many planned for and unexpected costs.
Is it wise to use credit cards for Christmas spending?
It’s important to remember when using a credit card, you’re borrowing money and you must pay it back. A credit card can help you to financially plan for the festive period and to spread the cost of your purchases. If you make your credit card repayments on time, it can also help to improve your credit score over time.
Another advantage of using credit cards is that they come with greater financial protection, Section 75 of the Consumer Credit Act will legally cover you for any purchase that costs between £100 and £30,000, the protection applies even if you only partly paid on your credit card.
There are also different types of credit cards that offer varying benefits and when used wisely can help to ease the costs of Christmas.
Cashback credit cards
It’s no secret that people spend a lot of money to cover Christmas costs. According to Finder’s study, the average credit card spending on Christmas will be £627. A cashback credit card lets you earn money on any purchases you make and this could be a savvy way to spend during the holidays. Cashback usually varies between 0.25% to 1% but introductory rates can be up to 5%. Keep in mind, cashback credit cards have high APRs and if you don’t pay off your balance in full, any rewards you’ve gained could be lost.
Purchase credit cards
The season of gift-giving can be expensive and a purchase credit card can help you to spread the cost. These cards let you pay for items upfront and then pay back the amount you borrowed in monthly instalments. You could even save more borrowing this way, if you find a card with an interest-free period, as you won’t have to pay interest for many months. You need to be aware that once the interest-free period is over, the interest rates can rise sharply.
When not to use a credit card
You should always keep in mind that with a credit card, you have to pay back the lender. Your credit card limit is not free money and if you don’t keep up with payments you risk falling into debt. If you miss repayments, you could also damage your credit score which will make it harder to borrow money in the future. Pay attention to the small print on any card you want to use. Don’t spend what you can’t afford to repay and remember it’s the thought that counts with Christmas not the cost.
This article is not financial advice, please read the terms and conditions for any credit card you use