Avoid a credit card hangover this Christmas

Latest research made by travel rewards firm Airmiles showed that an average UK shopper would spend about £300 each on Christmas presents this year, or a total of £10.5bn. As the Yuletide nears and we buy gifts for our loved ones, it is easy for the budget to swell. However, there are simple ways to avoid starting 2010 with a debt hangover.

Financial experts advice that the best way to spread our budget is to use credit cards with zero interest rates. There are several credit card providers that offer 12 months interest-free, including the Tesco Clubcard Mastercard, which also offers 0 percent on balance transfers for six months and five Clubcard points for every £4 spent at Tesco or one point for every £4 spent elsewhere.

David Black, a banking expert at analysts Defacto advises those with a good credit rating to change their credit card and take advantage of a zero percent introductory purchase offer. This would spread the cardholder’s Christmas budget without paying interest.

Credit cards that offer zero interest rates are like taking a loan without any interest. They are very helpful if you want to cover all your Christmas shopping with your salary or without dipping into your savings.

But if you think you will have a problem paying off the minimum monthly balance, even zero interest-rate credit cards are not advisable because these cards can be very tempting to spend more than what you can afford to pay off every month. Once the introductory period is up, the interest will quickly add up in your outstanding balance.

Because of the recession, many lenders are still very strict in issuing credit cards. Many credit card providers will only lend to those who have a good credit standing. It will damage your credit ratings if you have multiple credit cards applications and being rejected.

You can check your credit rating for free with services like Credit Expert.

To those who have extra cash and do not need credit cards for their Christmas spending, reward credit cards are your best option. These cards offer many benefits, including cashback on all your spending, build up airmiles and loyalty points.

American Express recently launched its rewards credit card, which offers three points for every £1 spent at major UK supermarkets, two points for £1 spent at department stores and one point for money spent elsewhere. Points can be redeemed for vouchers to shop in Marks & Spencer, Harrods, HMV, House of Fraser, Comet as well as Molton Brown and other big names.

The Barclaycard Cashback card is a good alternative paying, 1 percent on the first £2,000 spend each year and 0.5 percent thereafter.
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