Even if you've been able to put some money aside over the course of the year to cover your festive spending, you should still think about using a credit card. Not only do you get extra protection thanks to Section 75 of the Consumer Credit Act, but you can also get rewarded in the form of cashback, loyalty points, or even air miles.
You can then use your savings to pay off your balance. These cards tend to come with pretty high APRs, so if you don't pay the balance off in full, the interest will pay will soon wipe out the value of any of the rewards you've racked up.
The best fee-free cashback credit card is the American Express Platinum Cashback Everyday card. This card pays 5% cashback on all purchases in the first three months, up to a limit of £100 cashback.
After that you'll enjoy tiered rates of up to 1.25% cashback, depending on how much you spend. You get 0.5% if you spend up to £3,500, 1% when you spend £3,500 to £7,500 and 1.25% if you spend over £7,500. It has a representative APR of 19.9%
American Express has another cashback card worth a look, the Platinum Cashback card, which has a higher cashback cap in the first three months of £125 and pays a flat rate of 1.25% thereafter. The rate doubles to 2.5% in your anniversary month each year too. However, there is a £25 annual fee to consider. It has a representative APR of 18.7%.
Then there's the Santander 123 credit card. Again this one has an annual fee, though the £24 charge is scrapped for the first year if you have a 123 current account too. The 123 credit card pays up to 3% cashback, depending on where you do your spending. You get 3% at petrol stations and on National Rail and Transport for London, 2% at all major department stores and 1% at all major supermarkets. It's also paying 1% cashback on all purchases at Amazon this Christmas with no cap on how much you can earn. It has a representative APR of 22.8%.
Finally, if your credit rating isn't great, you could still earn cashback with the Luma Cashback card for Poor Credit. However, this only pays 4% cashback on fuel and supermarket spending, and nowhere else, up to a maximum of £9 cashback a month (so £225-worth of spending). This card also comes with a huge APR of 35.9%, so make sure you pay the balance off in full each month.
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There are plenty of different rewards cards out there attached to a range of different rewards schemes.
There's the Tesco Clubcard Credit Card for Purchases (representative APR of 16.9%) which not only offers a 16-month 0% period on your spending but also earns you five Clubcard points for every £4 you spend in Tesco stores and one point for every £4 spent elsewhere.
Or for Sainsbury's shoppers there's the Sainsbury's Bank Nectar Credit Card (representative APR of 16.9%), offering 15 months of 0% interest on purchases, four points for every £1 you spend in store and one point for every £5 spent elsewhere.
Alternatively for Nectar fans there's the American Express Nectar Credit Card (representative APR of 25%), which comes with 20,000 bonus points if you spend £2,000 on the card in the first three months and then offers up to four points for every £1 spent at Nectar partners, with two points for every £1 you spend elsewhere. Note that there's a £25 annual fee on this card.
Still with American Express, there's also the Preferred Rewards Gold charge card. Spend £2,000 in the first three months and you get 20,000 reward points, while you also enjoy double points in year one on your spending on petrol and at supermarkets. This is a charge card rather than a credit card, so you have to pay the balance off in full each month. Normally it comes with an annual fee of £125 but at the moment it's fee free for the first year
Finally, you can use your Christmas shopping to help pay for next year's holiday by going for an air miles card, such as the Lloyds Bank Avios rewards cards (annual fee of £24 and representative APR of 22.7%), TSB Avios credit cards (representative APR 17.9%), British Airways American Express (representative APR 15.9%) or the Virgin Atlantic White Card (representative APR 17.9%).
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The best 0% purchase credit cards
If you don't have money already set aside to cover all of your Christmas shopping, or have a lot of big purchases in prospect, then getting a 0% credit card is a decent idea, providing you can afford to repay it. That way you can spread your payments without having to worry about paying any interest.
The table below runs down the cards offering the longest 0% periods on your spending:
So you can get a full year and four months clear of interest with the Tesco Clubcard credit card, and rack up Clubcard points in the process. However, if it takes you 16 months to pay off your spending from this Christmas, learn your lesson and start planning how you will pay for next year's shopping!
You don't want to keep kicking your debts down the road as they will soon snowball into something unmanageable.
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