Money Magic: some Christmas credit

Paul Lewis suggests a relatively cheap way of paying for the season of goodwill

Now is the time to give yourself a card for Christmas. To be precise, a credit card to buy those Christmas gifts and spread the cost over the next six months or more on interest-free credit. Yes, you can borrow the cost of Christmas and pay it off without paying a penny in interest.

Step 1: Find a credit card that offers you 0% on purchases for at least six months. There are a couple of dozen of these still around and the interest-free period ranges from six to 12 months. Try or – with care –

Step 2: Are you a good or a bad credit risk? Have you missed payments on cards, mortgage, overdraft, or monthly mobile phone bill (all bad)? Are you not on the electoral roll (bad)? Are you not a home owner (bad)? Have you moved a lot or applied for lots of credit recently (both bad). If you are a bad risk the cards with the highest APRs are more likely to approve you.

Step 3: When you apply for the card (or as soon as it arrives) set up a direct debit to pay the minimum each month. That will stop you missing the payment, incurring a £12 penalty and probably losing the 0% deal.

Step 4: Use the card only for Christmas spending. Do not use it for day-to-day spending – or treats for you. Do not be tempted by a balance transfer deal. On 2 January 2010 get your scissors out and cut up the card.

Step 5: When the statement arrives in January call the card company and ask which statement you have to clear in full to avoid paying any interest. Work out the number of months left at zero percent. Divide the total due on the card by the number of months. Write down that figure. Deduct the minimum payment (which is made by direct debit) and pay the rest by sending a cheque.

Step 6: Every time a statement arrives do the same.

Step 7: When the final statement of your interest-free period arrives ensure you pay off the whole amount by the due date. Add on days for postal delays and more days for the payment to “clear”. The safest thing is to pay as soon as you get the statement. Cancel the card.

Well done! You have paid for Christmas over several months interest-free! Magic!

Paul Lewis is a freelance writer. He presents Money Box on BBC Radio 4

Published in 29 October edition of Community Care 2009


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