Beware of piling on the pounds with credit card debt
If you've got to go for credit over Christmas, there are some attractive deals on offer that can minimise the pain
Sunday 16 December 2012
What does Christmas mean to you? Too much food, perhaps, a Bond film on the telly and carols from King's? But the reality is that for most Brits, Christmas also means piling on the debts. And there is little avoiding it: from presents, to treats, to keeping the house warm while you're off work, Christmas is a very expensive time.
So if you have to resort to credit over Christmas, what are your options, how can you keep the costs to the minimum, and what types of credit should you avoid like the plague – no matter what the shop salesperson tells you?
Although it is still difficult to get a mortgage without a hefty deposit and a squeaky clean credit record, the short-term credit taps are gradually being turned back on again. The Bank of England, through its Funding for Lending programme, is injecting extra money into the banking system, and some of this is finding its way to consumers in the form of credit cards and loans. As a result, the market for credit cards has hotted up in the run up to Christmas. "We have seen a loosening, no doubt. With more competitive loan and credit card deals now available, this may not be seen in lower interest rates but more in the offer of longer interest-free and balance transfer periods," says Andrew Hagger from Moneycomms.
Mr Hagger points to Tesco, M&S Bank and Halifax all offering 0 per cent interest on new purchases – for 16 months in the case of Tesco and 15 for M&S Bank and Halifax. After the interest-free period rates revert to 15.9 per cent for M&S, 16.9 per cent for Halifax's All-in-one card and 17.9 per cent in the case of Tesco's Clubcard credit card. And as Kevin Mountford at Moneysupermarket points out: "You get Clubcard points with the Tesco card and M&S points with the Marks and Spencer card."
However, not all Christmas debt can be cleared at once, and many will already have a balance on their existing credit card. This is where balance transfer interest-free periods become important. Sarah Pennells, founder of the financial advice website SavvyWoman.co.uk says: "If you want to transfer your balance, Barclaycard currently has a card charging 0 per cent interest on balance transfers for two years. The fee is pretty steep at 3.2 per cent (it works out at £64 if you transfer £2,000), but it could save you a lot in interest if you can't clear your credit card debt in the next couple of months."
Other balance transfer credit cards worth looking at, according to Mr Hagger, include the NatWest platinum which offers 23 months at 0 per cent, reverting to 17.9 per cent APR (balance transfer fee 3.5 per cent) and the HSBC card, with 23 months at 0 per cent then 16.9 per cent APR (balance transfer fee 3.3 per cent).
For those with large balances which they plan to pay off relatively soon, the new MBNA platinum card offers 0 per cent for 14 months but, crucially, the fee is just 1.25 per cent. This means that someone looking to transfer £5,000 on to the MBNA card would pay only £62.50, which compares very favourably with the NatWest platinum card, for instance, which would levy a fee of £175 for the same transaction.
The MBNA offer is open only to customers who apply through its website by the end of December.
Balance transfer maybe a good way to go, according to Mr Hagger, as it's unlikely that a new card application would be processed this side of Christmas. "You'd be pushing it to get one this side of Christmas if even you apply today. However the balance transfer card is a sensible option if you need to spread your Christmas debt over the first two or three months of the New Year."
Mr Hagger adds that if you have a cashback credit card such as the American Express Platinum cashback card, which pays 5 per cent for three months, capped at £125, or the Capital One Aspire World card, which pays the same 5 per cent for the first three months, capped at £100, then Christmas can be an ideal time to build up rewards and then transfer away in the new year to a 0 per cent deal.
But because balance transfer deals are so sought after, lenders can be choosy. "You're more likely to qualify if you earn £20,000 a year or more, have had credit agreements for the last four years and managed them well," Ms Pennells says.
All in all, if it simply has to be for Christmas, credit card debt shouldn't be for life. "What you want to avoid at all costs is still paying for Christmas 2012 at this time next year, Mr Mountford says. "If you must borrow then have a budget and a plan for repayment in place."
What the experts say
Andrew Hagger: "With the average store card rate at 28.2 per cent APR and a number of cards charging 29.9 per cent APR, I wouldn't touch most store cards with a bargepole. The only exceptions are Debenhams, House of Fraser, Laura Ashley and TopShop where the rate is 19.9% and not too much higher than the average credit card rate"
Kevin Mountford: "Overdrafts are expensive and if you dip into yours ensure that this is on an approved basis or else the charges will soon escalate and again make sure it is for a short term fix."
Sarah Pennells: "If you need to borrow money to get you through Christmas, whatever you do don't go to a payday loan company.
Kevin Mountford: "The evidence is that the cost of payday lending is going up rather than down."
Paying debt back
Sarah Pennells: "Overpay the debt charging the highest rate of interest so your money works as hard as it can. Make sure you pay the minimum or the fixed payments (if it's a loan) on all your other debts. Once you've cleared one debt, work down to the next highest interest rate and so on."
Debt in Britain: Numbers seeking help on how to cope with mounting bills goes up by more than half in three years
Bargain Hunter: BT improves its mobile reception with 'incredibly competitive' deals
Offset your mortgage and save thousands
Simon Read: 'It went below the radar but you could be eligible for a tax break on your savings'
Women to lose benefits from contracted-out pension scheme
- 1 East 17 bandmember Brian Harvey in 'very desperate situation’
- 2 Is this bridge haunted by the ghost of nu rave?
- 3 Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
- 4 The West has it totally wrong on Lee Kuan Yew
- 5 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
Revealed: Putin's army of pro-Kremlin bloggers
The West has it totally wrong on Lee Kuan Yew
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...
Day In a Page
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station