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Christmas on credit could save debt-ridden consumers

15 November 2007
The nation’s debt has hit an average of £1,000 per household - more than triple the level of four years ago, according to figures released by Credit Services Association. However, the latest cashback credit card offerings could provide a means of saving money in the run up to Christmas.

Capital One and American Express have both introduced their latest cashback credit cards, aimed at shoppers looking to set aside a bit extra over the festive period.

With an APR of 5 per cent for the first three months, followed by a tiered reverts to rate ranging from 0.5 per cent to 1.5 per cent, dependent on the card holder’s annual spend, American Express just pips Capital One to the post in terms of benefits. Other lenders offering a similar return include Egg and Yorkshire Building Society.

For example, for someone with a constant average monthly spend of £1,000, Capital One would yield a £210 return in year one, compared with £247.50 with American Express. Moreover, neither card imposes a maximum cashback so the earning potential is almost limitless, restricted only by the individual’s credit limit and spending power.

Michelle Slade, analyst at comments: “With the cashback paid annually, take out one of these deals now and not will you only benefit from the introductory offer at a time when your spending will be at its highest, but just before next Christmas you will reap a healthy return too.”

Other cash-boosting methods currently proving popular include taking out cards that award points which can be swapped for in-store vouchers such as the M&S & More card which give vouchers worth 1 per cent on spending at M&S, and 0.5 per cent elsewhere.

However, while this may appear to be a generous offer, consumers are also being warned that they should look beyond such alluring introductory offers. If the card holder usually carries over a monthly balance so they have to pay interest, they could risk falling into a debt. With rates averaging 14.9 per cent, and in the case of American Express, 18.9 per cent, any interest paid will soon outweigh the cashback return.

Ms Slade continues: “Be extra savvy and make the best possible return, simply by using your card for all of your purchases, rather than using your debit card or paying with cash. Then transfer this into a separate savings account, ready to repay your balance in full each month. Not only will your cashback return rise, it’s a double bonus as you will be earning interest for the month too. With rates topping 6 per cent easily found, your money will be working extra hard.”

Find out more about American Express Amex Platinum Moneyback card or compare credit cards

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