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What's in Your Wallet?

 

By Jennifer Hill

LONDON (Reuters) - It might be few weeks before Christmas, but planning ahead to meet the cost pays dividends.

Those who intend to flex the plastic when hitting the shops should act now to secure the best deal for their circumstances.

Credit card providers typically take up to four weeks to process an application, but with a surge in demand expected in the run-up to the festive season, the process could take longer.

Borrowers who are unlikely to clear their balance in full when bills land on their doormat in the New Year should hunt down an interest-free offering.

Average spend


Some 89% of credit card holders do not opt for cards offering 0% on purchases, according to price comparison service moneysupermarket.com. But they could save almost £2 billion on interest payments next year by opting for a 0% offering ahead of Christmas, based on last year's average spend of £482.78.

Robert Kenley, head of credit cards at moneysupermarket, said: "Cards offer a simple and tempting way to help spread the cost of Christmas. However, people need to ensure they card they apply for is not going to end up costing them more than they can afford."

There are currently more than 30 credit cards that offer 0% on purchases, three of which - GE Money Transformation, Halifax One and Marks & Spencer &More - last a year.

Incentives


However, borrowers who do not carry over a monthly balance - and, therefore, are not charged interest - should concentrate instead on incentive-based cards.

"If you are not someone who pays credit card interest, why not take the opportunity to make some money from your card provider; after all it's nice to be able to turn the tables every now and again," said Andy Britchford, a personal finance analyst at moneyfacts.co.uk.

There are currently around 80 such cards on the market, offering loyalty bonuses, cash-back and donation schemes.

Cash-back deals, including Amex Blue, Egg Money MasterCard and Yorkshire Building Society Classic Visa, typically return 0.5-1.0% of spending to card holders.

Triple cash-back


Morgan Stanley is giving card holders triple cash-back - 3% on spending of up to £2,000 and 1.5% thereafter - until 1 February 2007.

Loyalty schemes vary, both in the collection of points and in the conversion rate from number of points to value of goods - and are only of merit if you would make use of the rewards.

AirMiles MasterCard gives one air mile for every £5 spent via AirMiles Travel Agency, and one mile for every £20 spent elsewhere.

Amazon MasterCard gives one point for every pound spent via the website, and 1/2 point for every pound spent at other retailers, with 1,500 points equating to a £15 voucher. It also gives 0% interest on purchases for six months.

And Asda MasterCard sends out Asda vouchers in November at a rate of 0.5% of spending.

"If you can be disciplined enough to use your credit card for your day-to-day purchases, while keeping the money aside to repay your statement at the end of each month, then it can be a win-win situation," added Britchford.

"The beauty for the savvy consumer is that they can earn interest on the savings for that month, as well as receiving cash-back or incentives 'free of charge' from their credit card provider."

 

Editor's Note: Please note that this article is aimed at UK residents. Always seek expert opinions before making serious financial decisions.

 

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