by Lauren Roberts, Communications Officer
Here we go. The big countdown to Christmas. The season of shiny lights and even shinier deals. A time when the stores pull out all the stops trying to woo you; luring you to buy more things than perhaps necessary.
For most people the festive season brings with it, not only good tidings and cheer but the ability to rack up significant debts. However, by taking the time to look at your finances now you might just be able to enjoy the celebrations, stress-free (well, almost).
If you are in a position to do so, saving in advance for those big purchases, even if you can only save a little, helps you get more for your money and takes the pressure off those January bills. However, for a lot of people using a credit card may be the most realistic way to manage Christmas. And if you use it well it can be a really useful tool; you can borrow for nothing, get extra protection on your purchases and even reward points or cash back when you spend. But, use it unwisely and you could end up paying lots of interest and racking up a debt you struggle to pay off.
Millions of credit card users get stung because they either have the wrong card for their needs or do not use it in the right way, don’t let that be you. So before the holiday season is upon on us, take this opportunity to look at how you can maximise the benefits of having a credit card and avoid any costly mistakes. Enjoy the good tidings and cheer, knowing you are getting the most out of your money.
How to avoid the major pitfalls
Don’t buy things you can’t afford
I know it sounds like we’re stating the obvious, but it is very easy to get carried at away with a credit card, especially at Christmas, and the debts will quickly rack up. So, only ever spend what you can afford and know you can pay back! If you don’t, you will regret it and possibly pay for the item numerous times over before you are free from the debt.
Always keep track of your purchases as you go along – remember it is your money that you are spending. Closely review your monthly statements – make sure you know exactly what is coming in and out each month as this will help you stay on top of it. It will also help you to spot any potential errors on the account early on, making it easier to dispute if necessary.
Don’t just apply for the first card you get offered, take some time and make sure you chose the right card for you. A card’s terms and benefits has to work with your situation and your spending habits, it’s not a decision that can be based on what your friends have in their wallets.
Pay your balance off in full
If you can, the best way to use a credit card is to clear your debts in full every month. That way, you can ignore the interest rate charged and take advantage of the cashback and reward cards on the market to cut your costs.
However, even if you can’t afford to clear the balance in full, make sure you are at least meeting the minimum payments, otherwise this will result in huge penalty charges.
Don’t be afraid to move
If you find that your current credit card isn’t offering you the best deal, don’t be afraid to move to one that is. There are a number of credit cards offering 0% interest on balances that you are transferring from other cards. They all come with transfer fees though, so make sure you are realistic about how long it will take you to clear the outstanding balance, and pick the lowest fee offered on that interest free period. Used wisely, these can be a great way of borrowing interest free, but make sure you keep up your minimum repayments and stick to your plan to reduce the balance by the end of the interest free period.
Never withdraw cash
You will be charged a withdrawal fee of around 3% every time. It just simply isn’t worth it.
Avoid overseas’ fees
If you are using your credit card to go on holiday over the festive period just be aware that the majority of debit and credit cards charge you a foreign loading fee of around 2.5% to 3% if you use them to make purchases while abroad. However, there are some exceptions to this, so do your research.
Don’t be afraid to ask for help
If you feel that you are struggling with even your minimum repayments, it is important to act as soon as possible. There are lots of free & independent services available to help. Visit www.stepchange.org, or call 0800 138 1111 for further advice.