Paying for Christmas on credit: what you need to know
Christmas is just a few weeks away, and with living expenses still painfully high, many people may be considering using a credit card to help cover the cost of this year’s festivities.
Credit cards can provide valuable protection when you buy goods or services, as under the consumer protection law known as Section 75, if you pay for something costing over £100 and less than £30,000 on credit, the card provider is equally liable with the retailer if something goes wrong.
For example, imagine you buy a £150 coat online for a loved one for Christmas, but it never turns up and you can’t get hold of the retailer so they can issue you with a refund. As the coat cost more than £100, the card provider is also liable, so must ensure you get your money back if the retailer won’t pay up.
There are plenty of cards which offer lengthy introductory 0% rates for purchases, but if you can’t clear your debt within this period, you’ll be hit by steep interest charges. It’s therefore essential to make a note in your diary of when interest charges will kick in and to have a clear plan in place for repaying what you owe.
Current best buy credit cards for purchases include M&S Bank’s purchase credit card which offers 25 months interest-free. After that, you’ll be charged a 24.9% annual percentage rate.
TSB’s Platinum purchase card also has a 0% introductory rate for up to 25 months, and again the APR jumps to 24.9% once this period ends.
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Could you earn cashback on your spending?
If you’re confident you can pay off your credit card balance each month, a cashback card might be worth considering.
As the name suggests, every time you buy something with your card, you’ll receive a percentage of your spending back. Lloyds Bank last week launched its new Ultra Credit Card, which offers 1% cashback on spending for the first 12 months. After that the cashback rate falls to a less competitive 0.25%. This card charges an annual percentage rate of 12.9% if you don’t clear your balance in full each month.
Alternatively, the American Express Everyday credit card offers 5% cashback for the first five months, capped at £125. After that the card offers 0.50% cashback on spending between £1 and £10,000 per year, rising to 1% on spending over £10,000 per year. Whilst the cashback offered by this card is generous, it charges a hefty interest rate of 29.7% APR.
A spokesman for Moneyfactscompare said: “When choosing a cashback card, it’s important to check the terms to make sure it’s the most suitable and most beneficial option for your shopping habits.
“Bear in mind that you should aim to clear the balance on a cashback credit card in full each month to avoid paying interest, otherwise the interest charges could cancel out any cashback benefits.”