Choosing the right credit card for holiday spending – Forbes Advisor UK


The majority of us will no doubt be delighted 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 you have to think about the inevitable expense and, if possible, put in place plans to make it affordable.

The holiday season will likely be very different this year, perhaps with restrictions on social events and family gatherings, but it could still end up being an expensive affair. So if you are planning to apply for a credit card to help pay for some of your Christmas expenses, it is important that you choose the right one.

Whether you need a little help spreading the cost of your party favors or are looking to recoup something from your spending, we’ve rounded up some of the best options to help you find the right credit card.

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Credit cards to distribute the costs

This year, many people will be feeling more nervous than ever before. Job cuts and pay cuts mean the prospect of Christmas could be a huge financial worry for thousands of households. As a result, many will look to borrowing to help them get through the holiday season.

If this applies to you, it is essential that you look for an option where you will not have to pay (or very little) interest. One of these options is a 0% credit card purchase.

Buy credit cards allow you to buy items upfront on credit and then repay the borrowed amount over time in monthly installments. If you choose a card that offers an interest-free period, you can avoid paying interest on your expenses for several months – up to 20 months at best.

In other words, a 0% shopping credit card can be an inexpensive way to help you spread the cost of your Christmas expenses, like gifts and food (or travel, if we’re allowed. to go anywhere), rather than paying for it all at once.

A word of warning though – you should only spend on your credit card what you can afford to pay off. A 0% credit card purchase shouldn’t be used to rack up large amounts of debt that you will have a hard time paying off, so make sure you have a plan in place to pay them off before the 0% deal ends.

If you don’t, interest will kick in and it will quickly become an expensive way to borrow.

Low rate credit cards

To be accepted for the most competitive 0% credit card offers, your credit score will need to be on top. If not, you may be refused a 0% shorter 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 what you will be charged with a standard credit card. Often times, you will be charged between 7.9% and 9.9%, compared to the 20% to 23% charged by standard credit cards.

Most importantly, you will be billed on low rate interest for the life of the debt, which means that there is no deadline by which you must have cleared your balance (although it is always best to clear it as soon as you can). Low APR credit cards may therefore be more suitable for those who fear that they will not be able to pay off their credit card balance after a few months.

Cashback on Christmas purchases

Even if you’re fortunate enough not to worry too much 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, allow you to get back a percentage of whatever you spend, and that is usually paid into your account monthly or annually.

Note that some credit card providers will cap the amount of cash back you can earn each year, so be sure to check before applying.

Often times you will find that the reimbursement rates are staggered so that the more you spend, the higher the reimbursement rate. Or your card may offer an introductory cash back rate for the first few months, which could be ideal as Christmas approaches.

The big problem with cash back credit cards is that they usually charge high interest rates, so they’re best suited for those who can afford to wipe their balance every month. If you are unable to do so, the amount of interest you pay could far outweigh 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 for spending

In addition to earning cashback, some credit cards offer other incentives such as loyalty points at your favorite 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 be spent at the same retailer or supermarket. This could be especially useful if you want to save money on gifts for loved ones or even your Christmas food shopping.

You can also use a card that allows you to accumulate airline miles as you spend, which can then be redeemed for flights, hotels and vacations. If you dream of flying to a warm place next year, this might be a good choice. for you.

Some reward credit cards also offer 0% offers on purchases, but be aware that they are not always the most competitive and you should always look to clear your balance before the 0% period ends and begins. interests.

Others, however, will charge interest upfront. Always be sure to check carefully before you apply, and if you are charged interest, be sure to pay off your balance in full each month so you can avoid it.

Again, you should never spend more than what you know you can afford to repay and again, you will need a good credit score to be accepted. You can read more about cashback and reward credit cards in our guide.

Can I still use a credit card if my credit rating is low?

Having an uneven 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 any at all. Certain credit cards – called credit builder credit cards – are designed to help borrowers improve their credit rating over time.

Credit cards usually have low credit limits, but as long as you use your card wisely (that is, you pay on time each month and don’t go over your credit limit) it can. increase after a number of months.

This type of credit card also usually charges a high interest rate, so it’s essential that you pay off your balance in full each month. That said, a handful of credit credit cards offer 0% on spending for three or four months, which can give you a bit of a break if you have to spread the cost of your spending as Christmas approaches.

However, if you want to go this route, it’s important to sit down and figure out exactly how much you’ll need to pay each month to make sure you clear your balance before the 0% offer ends. So if, for example, you’ve spent £ 500 on a card offering 0% for four months, you’ll need to pay £ 125 each month to make sure your balance is clear after the 0% offer ends.

Valuable purchase protection

There is another benefit to paying for your holiday purchases with a credit card, and that is the fact that your purchases will be protected by Article 75 of the Consumer Credit Law.

This means that if you buy something that costs between £ 100 and £ 30,000, your card provider is jointly responsible with the retailer if the item is faulty or does not show up. This could prove invaluable if you plan to do a lot of your Christmas shopping online – for example, if you’re hoping to take advantage of pre-Christmas sales like Black Friday, which takes place on November 27 of this year, and Cyber ​​Monday which falls on November 30th.

The protection of section 75 also applies even if you have only made a deposit on the card.

How long does it take to get my credit card?

If you apply for a credit card online, there are many providers that offer instant approval. Otherwise, you can expect to wait five to ten days to find out if you’ve been accepted. If you have one, then it will take approximately 10 business days to receive your credit card.

If you are planning to start your Christmas shopping soon, then it may be worth applying for a credit card as soon as possible.

For more tips on reducing Christmas stress and cutting costs, read our guide: 12 money-saving ideas for this year’s holiday season.

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