Seven Sensible Spending Tips for Christmas

About one-third of us are expecting to use credit cards to help cover the cost of Christmas this year. But used incorrectly, the extra spending could put you at risk of high charges and even damage your credit score.

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Here are seven ways you can ‘play your cards right’ over the festive season and spend sensibly…

1. Always repay on time

Paying off your balance on time demonstrates your ability to manage money and meet your obligations, which is the first thing that potential lenders will look for in the future. If you can afford to clear the entire balance each month – which every borrower should work towards – you should.

2. Set up a direct debit

Three in ten people have missed payments recorded on their credit reports. If you’ve regularly missed payments in the past, lenders may think that you’re likely to do it again in the future. And remember, missed payments stay on your record for at least six years.

The best way to avoid this is to set up a direct debit to cover at least the minimum repayment. You can usually do this over the phone or online – just contact your provider and ask.

3. Avoid the minimum payment trap

Need to tighten Santa’s belt this Christmas? Recent research suggests that the average family will spend around £800 on Christmas this year. If you use your credit card and only make the minimum repayment every month, this year’s expenditure could end up taking you 16 years to pay off!

With minimum repayments, your debt will get smaller, but so will your monthly repayments. Therefore, as your debt decreases, the rate at which you pay it off slows. This can mean that even a small debt can end up drawn out over a long period of time, costing you a significant amount in interest.

Combat this by paying a higher monthly payment of a size you’re comfortable with. For more information, check out our minimum payments guide.

4. Never withdraw cash on your credit cards

Unlike purchases, interest is charged immediately when you withdraw cash so you could end up paying a lot of money.

And, it isn’t just ATM withdrawals that credit card companies count as you taking cash from your account. Placing bets, buying currency and purchasing travellers cheques are all considered cash withdrawals and will result in additional fees and immediate interest charges.

5. Keep an eye on how much credit you use…

Maxing out your card can make you look less attractive to lenders. This could be a problem if you’re planning on applying for a mortgage, loan, or another credit card. Experian recommend that you try to keep the balance on your credit account to less than 25% of the credit limit. So, if your credit limit is £1000, try not to use more than £250 of it.

6. …and how much credit you have available

Having many accounts open at the same time is another no-no for lenders.

Even if you don’t use all of the accounts, it looks like you have a lot of credit available to you and will make lenders think that you’re not managing your money well. Don’t just cut up your old cards – contact your card issuers and permanently shut the accounts.

However, don’t cancel so many cards that you’re left close to your credit limit and struggle to keep on top of your finances.

7. Make your existing card debts cheaper

A 0% balance transfer card can be a cheap way to pay off small debts. If you move your credit card debts on to one, you could pay no interest for more than two years and save hundreds or even thousands of pounds.

Find the balance transfer cards that could accept you here: