Almost seven million consumers will be funding Christmas on a
credit card this year, and of those over five million will be using expensive standard rate cards rather than ones that offer interest free periods on purchases, says
moneysupermarket.com.
Research the comparison site into credit card spending habits this Christmas found only nine per cent will be using a card that offers cash back on purchases and only 11 per cent will be using a zero per cent purchase card, meaning Brits could be paying well over the odds this December.
Worryingly, says
moneysupermarket.com, seven per cent of borrowers will be using a balance transfer credit card to fund their seasonal spending, despite these cards being designed for paying off existing debts rather than for new spending.
The comparison site is encouraged that over half of
credit card users, some 3.8 million Brits, plan to pay off their debt within three months of Christmas. However, over 500,000 credit card users will take over 12 months to clear their debt, meaning they will still be in the red by next year's festivities.
"This Christmas is going to be especially tough on the nation's finances, so it's no surprise to see many consumers turning to their flexible friends to tide them over,” said Kevin Mountford, head of banking at
moneysupermarket.com.
“It's all about borrowing smart, so
credit card users should ensure they are either paying as little interest as possible, or using a product that rewards them for spending.
"A credit card offering zero per cent interest on purchases might be the cheapest option for cash strapped shoppers, provided they are able to pay off the balance in full before the promotional period ends.
“We have seen several providers introduce longer interest free periods for big ticket spending. This could be a good option for anyone making large purchases this year, provided they don't get carried away with their spending - the cost of a few big ticket items soon adds up.
"It's also very important consumers avoid using a zero per cent balance transfer card for their shopping as these are designed to transfer existing
credit card debts, and although many have limited zero per cent offers for purchases, they only last for around three months before the purchases accrue interest at the standard rate.
"If you are one of the five million borrowers who will be spending on a standard rate card over Christmas, you should make plans to pay off the balance as soon as possible in the New Year. If you cannot pay off the balance immediately then consider a zero per cent balance transfer card and switch your debt over."
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