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

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

Store cards

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"

Overdrafts

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."

Payday perils

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."

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
peopleFrankie Boyle responds to referendum result in characteristically offensive style
News
news
Life and Style
Couples have been having sex less in 2014, according to a new survey
life
New Articles
i100... with this review
PROMOTED VIDEO
Voices
Holly's review of Peterborough's Pizza Express quickly went viral on social media
Sport
footballTim Sherwood: This might be th match to wake up Manchester City
Arts and Entertainment
musicHow female vocalists are now writing their own hits
New Articles
i100
News
news
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
News
Blahnik says: 'I think I understand the English more than they do themselves'
people
Arts and Entertainment
Michelle Dockery as Lady Mary Crawley in Downton Abbey
TVInside Downton Abbey series 5
Life and Style
The term 'normcore' was given the oxygen of publicity by New York magazine during the autumn/winter shows in Paris in February
fashionWhen is a trend a non-trend? When it's Normcore, since you ask
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam