Credit: Make sure a new year hangover is not on the cards

As the shopping festivities start, Chiara Cavaglieri shows how to stop your flexible friend from becoming a fiend

Take a walk down any high street today and you'll no doubt see Christmas shoppers out in force. This is the time of year that the credit card balances of millions of Britons take a not so festive pounding.

Research from Airmiles, the travel rewards scheme, shows that UK shoppers plan to spend about £300 each on Christmas presents alone this year, totalling a colossal £10.5bn. Budgets can quickly go out of the window, but there are some simple ways to make sure you don't start 2010 with a debt hangover.

One of the cleverest ways to spend at Christmas can be with a 0 per cent purchase credit card. Right now, several cards offer an impressive 12 months interest-free, including the Tesco Clubcard Mastercard, which also offers 0 per cent on balance transfers for six months and five Clubcard points for every £4 spent at Tesco or one point for every £4 spent elsewhere.

"If you have a good credit rating, think about changing your credit card to take advantage of a 0 per cent introductory purchase offer. That way, you can spread the cost of Christmas without paying interest," says David Black, a banking expert at analysts Defaqto.

These cards are ideal if you're concerned about covering all your Christmas spending with your December salary or having to dip into any savings. It essentially works as an interest-free loan. However, if you think you will struggle to pay off the minimum balance each month, steer clear. At 0 per cent, these cards can easily tempt you into spending more than you can afford to pay off each month, and if there is an outstanding balance once the introductory period is up, the interest will quickly mount up.

Lending criteria are still extremely tight. Many credit card companies are willing to lend only to those with a perfect credit record. Making multiple applications for credit cards and being rejected will damage your credit rating, so it's worth checking your record with one of the three credit reference agencies: Equifax, Experian or Callcredit. This will allow you to scan for any errors and ensure that your record is amended. You can also attach short explanations for lenders if there are any other blemishes, but if you have a very poor rating it may be prudent to avoid applying for the best deals altogether.

For anyone lucky enough not to need credit, you can still be rewarded for your spending this Christmas. Reward credit cards are the perfect tool for the savvy shopper – if used correctly. These cards come in various guises. Some will offer cashback on all your spending, while others offer the chance to build up airmiles and loyalty points.

"Many reward cards offer additional points or cashback for the first few months. It is well worth getting one before you start making your big purchases over Christmas and the Boxing Day sale period in order to take maximum advantage of this," says Rumina Hassam from comparison service

Last week American Express launched its rewards credit card, which offers three points for every £1 spent at major UK supermarkets, two points for £1 spent at department stores and one point for money spent elsewhere. Points can be redeemed for vouchers to shop in Marks & Spencer, Harrods, HMV, House of Fraser, Comet as well as Molton Brown and other big names. If you don't fancy making use of the points system, the Barclaycard Cashback card is a good alternative paying, 1 per cent on the first £2,000 spend each year and 0.5 per cent thereafter.

In the run-up to Christmas, store cards are offered with regularity in shops. The appeal of an instant discount while you're at the till is understandable but the interest rate on these cards can be extortionate. Among the highest rates for store cards are the Burton, Miss Selfridge and Warehouse cards, all of which charge 29.9 per cent, nearly 60 times the Bank of England base rate.

The only exception is if you're struggling to get credit anywhere else. In some cases store cards can be the lesser of two evils as sub-prime credit cards, aimed at those with poor credit ratings, actually charge much more than most store cards. The Vanquis Visa Card, for example, charges from 39.9 per cent to a massive 59.9 per cent APR variable. "As a rule of thumb, store cards are best avoided but for some with patchy credit records they may find that the rates they are asked to pay on credit cards aren't too dissimilar," says Mr Black.

A 0 per cent transfer card, which allows you to transfer outstanding credit card balances on to one card, and pay no interest for an introductory period, may prove to be a lifeline if you're struggling with mounting debts. The longest introductory period around is offered by Virgin at 16 months with a 2.98 per cent handling fee and an APR of 16.6 per cent.

Balance transfer cards give you some breathing space from your debts and the chance to pay them off without incurring any more interest, but they do come with strings. There is a handling fee of about 3 per cent to move your balances. It is also crucial not to use balance transfer cards for spending as they typically charge a high interest rate on purchases. And, because credit card companies require you to pay off the cheapest debt first, your debt costs more to pay off in the long run. Nationwide and Saga are the only companies offering a positive order of payments, so use a separate credit card for purchases.

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

    £16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

    SThree: Experienced Recruitment Consultant

    £20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

    Recruitment Genius: Collections Agent

    £14000 - £16000 per annum: Recruitment Genius: This company was established in...

    Day In a Page

    Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

    Cameron lowered the flag for the dead king of Saudi Arabia...

    But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

    Humanity must be at the heart of politics, says Jeremy Corbyn
    Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

    Joe Biden's 'tease tour'

    Could the US Vice-President be testing the water for a presidential run?
    Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

    Britain's 24-hour culture

    With the 'leisured society' a distant dream we're working longer and less regular hours than ever
    Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

    The addictive nature of Diplomacy

    Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
    Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

    Fashion: Ooh, Lady Chatterley!

    Take inspiration from DH Lawrence's racy tome with equally racy underwear
    8 best children's clocks

    Tick-tock: 8 best children's clocks

    Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
    Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

    Charlie Austin: ‘If the move is not right, I’m not going’

    After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
    Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

    How Isis profits from destruction of antiquities

    Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
    Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

    'If we lose touch we’ll end up with two decades of the Tories'

    In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
    Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

    The Arab Spring reversed

    Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
    King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

    Academic claims King Arthur was real - and reveals where he lived

    Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
    Who is Oliver Bonas and how has he captured middle-class hearts?

    Who is Oliver Bonas?

    It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
    Earth has 'lost more than half its trees' since humans first started cutting them down

    Axe-wielding Man fells half the world’s trees – leaving us just 422 each

    However, the number of trees may be eight times higher than previously thought
    60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

    60 years of Scalextric

    Model cars are now stuffed with as much tech as real ones