Published: 08/12/2020

Christmas tips to balance to books

4 tips helping you balance the books this Christmas

We’ll all pleased to see the back of 2020. Before we get to 2021, we have Christmas to think about. Of course, it will still be a joyful time for many, but the inevitable expenses should be thought about and, if you can, put plans in place to make it affordable.

Christmas and New Year celebrations are likely to feel very different this year, with restrictions on family gatherings and social events. It could still end up being a costly affair. So, if you’re considering applying for a credit card or a loan with 1Plus1 to help pay for some of your Christmas expenditure, make sure that you choose the right one.

If you’re looking to help spreading the cost of your festive gifts or you want to earn something back on your spending, our tips will help you with some of the best options to help you find the right credit card.

Spread the cost with a credit card

More people will feel more financially stretched this year, than ever before. Job losses, furloughing and pay cuts means that the prospect of Christmas may be a real financial worry for thousands of households. Many will turn towards credit cards and loans to help get 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 as little as possible) interest. One option is 0% credit cards.

Typically, cards allow you to buy what you want, when you want it on credit, then pay off the amount borrowed in monthly instalments over time. Choosing a card that offers an interest-free period, means you can avoid paying interest on your spending for several months – possibly up to 20 months in the best cases.

Essentially, a 0% purchase credit card can be a cheaper way of helping you spreading the cost of your Christmas spending, for presents, food, or travel, if we’re allowed to go anywhere, rather than having to pay 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. You should be sure that you can afford the monthly payments and ideally pay back by monthly payments of as much as you can afford – not just the minimum repayments. A 0% 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 begin to be charged and it will quickly become an expensive way to borrow.

Low rate credit cards

If this is what you are looking for, getting accepted for the best, most competitive 0% credit card deals, your credit rating needs to be in first rate shape. If it isn’t,  a lender may turn you down or perhaps offer you a shorter 0% interest period.

You can check out some deals here low rate credit cards.

Even though low APR credit cards do still charge interest, the rate is usually 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.  You should make sure that the card you are applying for is the best option for you.

Most importantly, you will only be charged the low rate of interest for as long as you owe the money or the offer lasts, meaning there’s no deadline by which you have to have cleared your balance (Though you should try to clear as soon as you possibly can).

Low APR credit cards as you can see on the Which? website, can be more suitable if you are concerned you won’t manage to pay off your credit card balance in a few months.

As always, make sure you can afford and always pay more than the minimum.  Cash advances may cost more – so try not to do any.

Cashback on Christmas shopping

If you’re lucky and not feeling too concerned about your finances this year, a useful way to pay for your Christmas shopping can still be a credit card.

As an example, Cashback credit cards, mean you get back a small percentage of anything you spend – a discount.  This is usually paid into your account each month or every year.

You should note that some credit card providers cap the amount of cashback you can earn each year, so make sure you check before applying.  It may also be possible to “double dip” with some cards if you use a card linked to say a hotel chain where you get points on the stay and cashback too!

Your card may offer an introductory rate of cashback for the first few months – which could be ideal in the run up to Christmas.  Quite often you will find that cashback rates are tiered so that, the more you spend, the higher the rate of cashback. But, don’t be tempted to spend more to get the very small benefits!

You should be very careful to understand the terms and conditions. Cashback credit cards often charge high rates of interest on outstanding balances, 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.

Spend and earn with your credit card – but be cautious!

Some credit cards offer other incentives such as loyalty points at your favourite retailer or supermarket, or airmiles as well as earning cashback.

Choosing a reward credit card that offers loyalty points and or cashback, means that these can then be turned into vouchers or rewards to spend in the same retailer or supermarket.  If you want to save money on gifts for family and friends or even your Christmas food shopping, this could be particularly useful

You might want to use a card that lets you build up airmiles or hotel points 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 well-known retailers offer cards that give you 0% interest periods, loyalty points and even allow you to transfer their loyalty points into airline and other schemes.

There are some reward credit cards that offer 0% deals on purchases.  But, you should 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 begins to be charged.

Some reward cards, will charge interest from the beginning. You should always be sure to check very carefully before you apply, and if you are being charged interest, try to make sure you pay off your balance in full each month so that you can avoid it.

You should only ever spend what you know you can afford to pay back.  Don’t be tempted to over-spend to get a small benefit, that will definitely be worth less than the interest you may pay.  You will also need a good credit score to get accepted. You can read more about polishing up your credit score in our blogs.

If my credit score is low can I still use a credit card?

You won’t qualify for the most competitive credit cards, if you have a weak credit score but that doesn’t mean you won’t be able to get or use one at all. Some credit cards – known as a credit builder card  are designed to help borrowers improve their credit score over time. It is important to understand that the card issuer will, like all lenders, look at your affordability and credit worthiness. Because cards are a form of revolving credit, a fixed term loan with 1Plus1 may be an answer. We will also consider whether you can afford a loan, your creditworthiness and you will need a guarantor. Paying back monthly on time will help improve your credit score.

So called credit builder cards usually have low credit limits, but if you use your card sensibly, which means, pay each monthly payment on time, don’t go over your credit limit and ideally pay off in full each month, the credit limit may be increased after a number of months. Your credit score will also improve.

As we said, this type of credit card usually charges higher rates of interest  That’s why it’s important to pay off your balance in full each month.

If this is what you think you will do, 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% offer ends. 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. Make sure you can afford that!

Purchase protection cover

There is one further advantage that you may not know about. If you pay for your festive purchases or any other time of the year, with a credit card, and that’s the fact your purchases will be protected by Section 75 of the Consumer Credit Act.

If you buy something costing between £100 and £30,000, this means that 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. As example, if you are hoping to take advantage of pre-Christmas sales each year as Black Friday, normally just after the U.S. Thanksgiving Day and Cyber Monday which falls on the Monday following.  That said, Black Friday seems to go on for some days if not weeks these days!

Section 75 protection also applies even if you have only paid a deposit on the card.

If I apply, how long will it take to get my credit card?

When you are applying for a credit card online, most credit card providers offer instant approval. If not, which is exceptional these days, you may have to wait five to 10 days before you hear whether you’ve been accepted.  Once you have been accepted.  If you have, it will likely 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.

Last updated: 29/12/2020