The majority of us will no doubt be pleased to see the back of 2020. But before we can get there, we have Christmas to contemplate. It will remain a joyous occasion for many, but the inevitable expense needs to be thought about and, if possible, plans put in place to make it affordable.
The festive season is likely to feel quite different this year, perhaps with restrictions on social events and household gatherings, but it could still end up being a costly affair. So if you’re considering applying for a credit card to help pay for some of your Christmas expenditure, it’s important that you choose the right one.
Whether you need a little help spreading the cost of your festive gifts or you’re looking to earn something back on your spending, we round up some of the best options to help you find the right credit card.
Credit cards for spreading the cost
This year, many people will be feeling more financially stretched than ever before. Job cuts and pay reductions mean that the prospect of Christmas could be a huge financial worry for thousands of households. As a result, many will be turning to borrowing to help see them through the festive period.
If this applies to you, it’s vital that you look for an option where you won’t have to pay any (or very little) interest. One such option is a 0% purchase credit card.
Purchase credit cards allow you to buy items upfront on credit and then pay off the amount borrowed over time in monthly instalments. If you choose a card that offers an interest-free period, you can avoid paying interest on your spending for several months – up to 20 months in the best cases.
In other words, a 0% purchase credit card can be a cheap way of helping you to spread the cost of your Christmas spending, such as presents and food (or travel, if we’re allowed to go anywhere), rather than paying for it all in one go.
A word of warning though – you should only spend on your credit card what you can afford to pay back. A 0% purchase credit card shouldn’t be used to rack up large amounts of debt you will struggle to repay, so make sure you have a plan in place to pay it back before the 0% deal ends.
If you don’t, interest will kick in, and it will rapidly become an expensive way to borrow.
Low rate credit cards
To get accepted for the most competitive 0% credit card deals, your credit rating will need to be in tip-top shape. If it’s not, you may be turned down or offered a shorter 0% period.
Fortunately, there is an alternative – a low APR credit card.
Although low APR credit cards still charge interest, the rate is much lower than you’ll be charged with a standard credit card. Often you will be charged around 7.9% to 9.9%, compared to the 20% to 23% charged by standard credit cards.
Crucially, you’ll be charged the low rate of interest for the life of the debt, which means there’s no deadline by which you need to have cleared your balance (although it’s still best to clear it as soon as you can). Low APR credit cards can therefore be more suitable for those who are concerned they won’t manage to pay off their credit card balance after a few months.
Cashback on Christmas shopping
Even if you’re lucky enough not to feel too concerned about your finances this year, a credit card can still be a useful way to pay for your Christmas shopping.
Cashback credit cards, for example, enable you to get back a percentage of anything you spend, and this is usually paid into your account each month or every year.
Note that some credit card providers will cap the amount of cashback you can earn each year, so make sure you check before applying.
Often you will find that cashback rates are tiered so that, the more you spend, the higher the rate of cashback. Or your card might offer an introductory rate of cashback for the first few months – which could be ideal in the run up to Christmas.
The big watch out with cashback credit cards is that they usually charge high rates of interest, so they are best suited to those who can afford to clear their balance each and every month. If you’re unable to do this, the amount of interest you pay could far outweigh any of the benefits offered by the card.
Also, be aware that you will need a good credit score to be accepted for the best deals.
Earn rewards as you spend
As well as earning cashback, some credit cards offer other incentives such as loyalty points at your favourite retailer or supermarket, or airmiles.
If you choose a reward credit card that offers loyalty points, these can then be turned into vouchers or rewards to spend in the same retailer or supermarket. This could be particularly useful if you want to save money on gifts for loved ones or even your Christmas food shopping.
Alternatively, you might want to use a card that lets you build up airmiles as you spend which can later be redeemed on flights, hotels and holidays – if you’re dreaming of jetting off to somewhere hot next year, this might be a good choice for you.
Some reward credit cards also offer 0% deals on purchases, but be aware they are not always the most competitive and you should still look to clear your balance before the 0% period ends and interest kicks in.
Others, however, will charge interest from the outset. Always be sure to check carefully before you apply, and if you are charged interest, make sure you pay off your balance in full each month so that you can avoid it.
Again, you should only ever spend what you know you can afford to pay back and again, you’ll need a good credit score to get accepted. You can read more about cashback and reward credit cards in our guide.
Can I still use a credit card if my credit score is low?
Having a patchy credit score means you won’t qualify for the most competitive credit cards but that doesn’t mean you won’t be able to use one at all. Some credit cards – known as credit builder credit cards – are designed to help borrowers improve their credit score over time.
Credit builder cards typically have low credit limits, but providing you use your card sensibly (ie you pay on time each month and don’t go over your credit limit), it may rise after a number of months.
This type of credit card also usually charges a high rate of interest, so it’s crucial that you pay off your balance in full each month. Having said that, a handful of credit builder credit cards offer 0% on spending for three or four months which can give you a bit of breathing space if you need to spread the cost of your spending in the run up to Christmas.
However, if you want to go down this route, it’s important to sit down and work out exactly how much you will need to pay off each month to ensure you clear your balance before the 0% deal ends. So if, for example, you’ve spent £500 on a card offering 0% for four months, you will need to pay off £125 each month to make sure your balance is clear once the 0% deal has finished.
Valuable purchase protection
There is one further advantage to paying for your festive purchases with a credit card, and that’s the fact your purchases will be protected by Section 75 of the Consumer Credit Act.
This means if you buy something costing between £100 and £30,000, your card provider is jointly liable with the retailer if the item is faulty or doesn’t turn up. This could prove invaluable if you’re planning to do a lot of your Christmas shopping online – for example, if you are hoping to take advantage of pre-Christmas sales such as Black Friday, held on 27 November this year, and Cyber Monday which falls on 30 November.
Section 75 protection also applies even if you have only paid a deposit on the card.
How long will it take to get my credit card?
If you apply for a credit card online, many providers offer instant approval. If not, you can expect to wait five to 10 days before you hear whether you’ve been accepted. If you have, it will then take around 10 working days to receive your credit card.
If you’re thinking about starting your Christmas shopping soon, it may therefore be worth applying for a credit card sooner rather than later.
For further tips on minimising Christmas stress and keeping costs down, read our guide: 12 Money-Saving Ideas For This Year’s Festive Season.