If you’re thinking of putting Christmas on your credit card this year, it’s time to start planning now. If you’re canny, you can pay no interest for a year or could even earn rather than pay interest on your shopping.
Option one: Interest-free for a year and earn extra cash
This first method requires a bit of planning and self-discipline, but could actually earn you money for using your credit card. This method is best if you plan to spread the cost of Christmas over the whole year and would usually pay off roughly the same amount each month.
- Step 1: Apply for a Best Rate 0% on new purchases credit card. The Tesco Clubcard MasterCard currently offers 13 months at 0% on new purchases.
- Step 2: Set up a direct debit for the minimum payment. If you don’t make at least the minimum repayment each month, you’ll lose the 0% deal and end up paying interest, defeating the whole object of the exercise.
- Step 3: Put your Christmas shopping on the card, but make sure you keep within your credit limit.
- Step 4: Open a Best Rate easy access savings account. Each month, put the amount you would have paid off your credit card (less the minimum repayment explained in point 2 above) into your savings account.
- Step 5: A month before the 0% deal on your credit card is due to expire, take the money out of your savings account and pay off the full remaining balance on your credit card.
Following these steps will mean you’ve paid no interest on your credit card at all throughout the year, and you’ll have earned a bit of interest on the savings you’ve built up.
Option two: your credit card company pays you to use the card
This method is much simpler and is a good alternative if you prefer to pay off your bill in full as soon as your statement arrives.
Quite simply, get yourself a Best Rate cashback credit card. If you pay off your bill in full, you’ll pay no interest and you can earn up to 1.25% cashback on all your spending.
Alternatively, if you do a lot of your shopping in one store, consider getting a retailer-branded reward credit card. BHS shoppers in particular could benefit hugely from this option, as the BHS credit card pays an impressive 5% reward on shopping in-store, double points on your first purchase and a very respectable 1% on spending elsewhere.
Play your cards right
Martyn Saville, Which? credit cards expert, explains: ‘In an ideal world, we’d save up for Christmas through the year, putting a few quid into a Best Rate savings account each month. But that’s not always how things work out and it’s a depressing reality that many of us will still be paying for Christmas when Bonfire Night comes round again next year.
‘The secret to getting the best deal on your credit card is to plan your spending and repayments carefully. There’s no point in putting your Christmas shopping on a credit card if it ends up costing you loads in interest, or if you’re still paying it off when next Christmas arrives. But clever use of a 0% on new purchases card can help you budget without paying extra.’
Get the best deal on your credit card and personal loans
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.