Short-term borrowing options for Xmas

Christmas is fast approaching but don’t panic – there are ways in which the festivities can be catered for if you haven’t got a great deal of cash. Get savvy with your financial products and you can get through the festive period without paying anything upfront – you can even make money if you’re really clever!

0% purchase credit cards

These offer 0% interest on purchases you make on the card for a certain amount of time – as long as you pay off the minimum balance every month and stay within your credit limit.

This means you can do your Christmas shop on the card and then pay it off gradually during the interest-free period.

However, if you cannot pay the whole amount of your outstanding balance within the interest free time period, then interest will start to mount up. So don’t spend what you know you won’t eventually be able to pay back.

Best cards around

The MBNA American Express credit card is the best for 0% purchases at the moment, but it does come with some terms that may not be suitable for some people.

0% on single purchases over £100 for 12 months – otherwise the zero interest term will be 6 months
No annual fee
Minimum repayment is your balance if this is under £25 or whichever is the greater of £25 or 1% of your balance before any default charges or interest
Discounts with Habitat, MacDonalds Hotels and Resorts and other partners
15.9% APR (variable)

The Sainsbury’s credit card is a good all-rounder.

0% interest for the first 12 months on all Sainsbury’s shopping – excluding Telecoms and Energy
0% interest for the first 10 months on all other purchases
No annual fee
Minimum repayment is 2.25% of the balance or £5, whichever is greater – if the amount is less than £5 you must pay the full amount
Double Nectar points every time you spend on your Sainsbury’s credit card in the first 2 years (new customers only)
15.9% APR (variable)

Current accounts with interest-free overdrafts

Some bank accounts will give you interest free overdrafts, meaning you can borrow the money you need without incurring any charge for the convenience.

You can use the overdraft to pay for those Christmas bits you need when your cash flow has dried up. Then over the first half of the year you can gradually pay back what you’ve spent each month, allowing you to spread the cost of Christmas.

After a certain amount of time you will have to pay charges on the overdraft, so if you know you won’t be able to pay it back over the months following Christmas, don’t use the free money in the first place.

Best accounts around

Alliance & Leicester Premier Current Account

0% EAR typical overdraft (maximum £2000) for the first 12 months
Usage fee of 50p a day applies after that
0.5% AER interest payable on balances of up to £2500 for one year
Free annual multi-trip European travel insurance worth up to £60
To qualify you must be over 21 and pay at least £500 into the account every month (or fees may be charged)

Alliance & Leicester offer the best deal around. Most other accounts can’t offer more than a £500 overdraft, require large sums of money to be deposited each month (as much as £50,000!) or charge quite large fees.

Cashback cards

Cashback cards work in a similar way to cashback sites – you earn when you make purchases.

You can use a cashback card to make your Christmas purchases and effectively receive a discount on these purchases from the money you gain in cashback.

For the vast majority of cashback cards you must clear your balance each month. So, if you can’t keep up with monthly repayments then a cashback card is not for you, plus you’ll and end up paying lots of interest as the rates are generally higher than standard cards.

If you end up accumulating interest on your monthly purchases, this defeats the object of receiving any cashback.

Best card around

American Express Platinum Cashback Credit Card