Christmas may come but once a year but for some people, the mess it makes of their finances lingers for many weeks or even months afterwards. If you’re smart you can save money and use your credit cards to ease the strain on your purse. But make sure you’re not caught out by the small print.
Make store cards work for you
I’m not a fan of store cards because the interest rates are so high (they can be almost 30% APR or more) but – if you’re disciplined – you can make them work for you, especially during the sales.
Many stores will give cardholders access to previews or an additional discount off the sale price. However, it only works in your favour if you use your card and pay it off in full.
SAVVYWOMAN TIP: Don’t sign up for a store card if you’re not very disciplined as it will encourage you to spend more, or if you can’t pay it off in full. Never pay the minimum as you’ll be stung with very high interest charges. Research from the financial comparison site Moneyfacts shows that if you spend £500 on a store card and pay the minimum each month it will take you ten months to pay it off in full and you’ll have been charged over £500 in interest.
Some store cards have also changed their terms and conditions so they can impose charges (of around £10) if you don’t use them or six months. You may also be charged if you’re in credit.
When using your credit card makes sense
Many of us use our credit cards more than usual over the festive period, but there are several reasons why it can make sense. For a start, you may shop at an unfamiliar online retailer and if you pay by credit card you may be protected by consumer law. If you are, you can make a claim against your credit card company if the goods are faulty, don’t arrive or the supplier goes bust.
In order to qualify, the goods have to cost £100-£30,000 although you don’t have to have paid the full price by credit card – just paying the deposit is enough.
SAVVYWOMAN TIP: Although the principle is quite straightforward, you’re only covered by the consumer protection if each item (or pair or set of items) costs £100 or more. That means if you bought a pair of shoes costing £100 you would be protected under Section 75 of the consumer Credit Act but if you bought two pairs of shoes costing £50 each you wouldn’t be.
You’re also not covered if you pay by store card, charge card or credit card cheques and you might not be if you’re the secondary cardholder and you use the card to buy a present for someone else. The law is a bit of a grey area and different card providers can interpret the law differently.
Using a credit card is also a good way of helping your cashflow while you wait for your January wages to hit the bank account. But it only works if you pay it off in full once the bill does arrive, unless you’re on a 0% interest deal. If that’s the case, set aside money to pay off your debt when the deal runs out or pay some off each month; whichever suits you. Either way, make sure you don’t pay interest on it.
When you should leave your credit card at home
Some people definitely find that the less it feels like they’re spending real money, the more they spend. If you’re on a tight budget you may be better off either leaving your credit cards at home or at least sticking a post-it note on your purse saying something like ‘remember that you have to pay the bill next month’ or one that’s equally effective in stopping you in your tracks.