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
  • Get to the point
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

    Ashdown Group: Business Analyst - Financial Services - City, London

    £50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

    SThree: Trainee Recruitment Consultant

    £18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

    Recruitment Genius: Administrator - IFA Based

    £22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

    Day In a Page

    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
    Public relations as 'art'? Surely not

    Confessions of a former PR man

    The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
    Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

    Bill Granger's luxurious sweet treats

    Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
    London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

    The mother of all goodbyes

    Paula Radcliffe's farewell to the London Marathon will be a family affair
    Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

    Steven Naismith: 'We know we must do better'

    The Everton forward explains the reasons behind club's decline this season
    Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

    Michael Calvin's Last Word

    Praise to Wenger for having the courage of his convictions