Wrap up festive spending with plastic power
CHRISTMAS is less than six weeks away, so if you want to put your festive spend on plastic it pays to take action now.
There is still time to order the right credit card for your seasonal purchases, but you do not have any time to waste.
You can choose from a vast range of credit cards offering interest-free deals on purchases, or cashback and other rewards for your spending.
However, you also need to make sure you do not run up more debt than you can afford. Shoppers looking for a card charging zero interest on purchases now benefit from longer introductory rates.
Sainsbury’s Nectar Purchase Credit Card offers the most generous interest-free period at a record 31 months, or more than two-and-a-half years, according to new research from financial information business Defaqto.
This means you would not start repaying interest on this year’s Christmas shopping until the summer of 2020.
There are a total of 210 credit cards on the market, of which half offer interest-free purchases for periods starting at three months.
Sainsbury’s Nectar Purchase leads the pack followed by another five offering interest free purchases for 30 months: Halifax Purchase, Post Office Money Matched, Sainsbury’s Bank Nectar Dual Offer, Santander Everyday and Tesco Bank Clubcard (Purchase).
Brian Brown, head of insight at Defaqto, said shoppers need self-control to make interest-free credit work: “Clear your balance by the end of any introductory period, otherwise you will be charged interest on the outstanding debt.”
With APRs typically jumping to 18.9 per cent, this can be an expensive shock. You could switch the debt to a zero interest balance transfer card, but there are no guarantees and it still has to be cleared one day.
Interest-free deals only work if you rigidly follow all the terms and conditions. Brown added: “If you miss a monthly payment your interest-free deal could instantly come to an end.”
Brown said the best deals require good credit scores: “Check your rating before applying. Many providers let you do this without affecting your credit record.”
Defaqto.com/creditcard allows you to check which cards offer this function, as well as compare rates and other benefits. A cashback card may work better for those who clear their balance every month. American Express Platinum Cashback Credit Card offers 5 per cent back on purchases for three months up to a maximum £125, then 1 per cent as standard. Brown said: “This enhanced introductory rate may appeal to those who are planning to spend a lot in one month, perhaps on a new TV or the Christmas shopping.”
Asda Money’s range of cashback cards, the NatWest/RBS Reward Black cards, and Santander’s All in One and 123 cards also offer cashback. Deals differ slightly, but Asda Money’s Cashback Plus returns £18 a year for someone who spends £100 a month on average, rising to £45 on £250 and £90 on £500 monthly spending, Defaqto figures show. Shoppers may be tempted to take out store cards as many offer an initial discount on first usage, worth up to 10 to 15 per cent.
Moneycomms.co.uk personal finance expert Andrew Hagger said this can net a major saving on a big-ticket item such as a sofa: “For example, the Topshop store card gives you 15 per cent off your first purchase if you spend more than £80.”
However, store cards should be handled with caution. He added: “You should only take advantage of an initial discount if you can repay your entire bill in one go. Otherwise you may incur interest at up to 30 per cent.”
Another option is to take out a reward card offered by highstreet retailers. “Choose a card from a store you use regularly to get the most benefits on your future shopping,” Hagger added.