CASH IN ON ZERO PERCENT CARDS
Normally I tell people to pay off debt. But Christmas is coming and, whether we like it or not, most of us will spend at least a bit more than we should. So how to manage it?
The danger with borrowing money to pay for Christmas is that a Christmas debt can break one of my Golden Rules. Never take longer to pay off a debt that the things you bought will last. So a holiday has to be paid off before you go away again. A pair of shoes has to be paid for before you stop wearing them. And this Christmas has to be paid off before you start spending for Christmas 2012.
The danger with putting your Christmas spending on a credit card is that the debt will hang around for ages. And with average credit card interest rates at 18%, if you spend £1000 you will be paying £15 a month just in interest without paying a penny off the debt. If you use a debit card and go overdrawn that could cost even more in penalties and charges.
But you can use credit cards wisely and borrow the money to pay for Christmas for nothing. You do that by taking out a new credit card and use it exclusively for your Christmas spending. There’s still time to apply for one of the handful of cards that charge 0% interest on purchases for at least a year and get it before Christmas. Use that card exclusively for all your Christmas spending. When you take it out agree to pay the minimum by direct debit – that will stop you getting a £12 penalty charge for not making a payment – even though it charges interest of zero percent you will still be expected to make payments.
After Christmas check your balance – on the phone or online – divide it by ten and take out a standing order to pay off that much each month. Then by October 2012 you will be free of this year’s Christmas debt. And it will not have cost you a penny.
One final important step. Cancel the card, cut it up and put the bits in separate rubbish and plastic recycling bags.
But you must be disciplined. Any deviation from the rules set out here can get you in debt so only follow this advice if you are really going to follow this advice precisely!
And if you do then you can take out another 0% card to pay for Christmas 2012!
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