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You’re doing your Christmas shopping wrong!
Christmas shopping is not an activity I’m too fond of. Traipsing through shops, being force fed Santa Baby, Misteltoe & Wine and the rest of the Christmas 'classics', while trying to work out what to get your grandparents who have everything.
But it’s not just what you buy that you need to think about. How you buy it is just as important to your bank balance.
How we pay
The Payments Council has published its forecast for Christmas spending this year and reckons that most spending will be done on a debit card. Of the £82.7 billion we are forecast to spend this festive season, £34 billion will be on a debit card. That’s over 40%, with cash the next most popular payment at £24 billion, followed by credit cards (£14 billion) and cheques (£10 billion).
I can understand why you might do your spending on a debit card. It’s easier to ensure you don’t spend more than you have as it comes straight out of your bank account. And banks like NatWest and RBS now pay some cashback on your debit card spending.
But the best way to do your Christmas shopping – and get rewarded for it – is to make the most of a credit card.
Credit cards that reward you
I’m not suggesting you stick it all on a 0% credit card and worry about paying it off later. No, the best way to do your Christmas shopping is to put a little aside throughout the year, do all your spending on a credit card, and then pay the balance off in full.
As a result you won’t pay any interest, you’ll benefit from extra protection on your purchases thanks to Section 75 of the Consumer Credit Act and you can even get cashback or rewards points on top.
So which are the cards to consider?
Cashback
As the name suggests, a cashback credit card will reward you with cold, hard cash for the spending you do.
If you don’t fancy paying an annual fee for a card, then the American Express Platinum Cashback Everyday card is one to take a look at. It pays 5% cashback in the first three months (capped at £100), followed by tiered rates of up to 1.25% depending on how much you spend over the year.
Fork out a £25 annual fee and you can get the American Express Platinum Cashback card, which again pays 5% in the first three months (capped at £125) followed by a flat rate of 1.25%. That rate then doubles in your anniversary month with the card each year to 2.5%.
Then there’s the Santander 123 credit card, which pays up to 3% cashback depending on where you do your spending. You get 1% at supermarkets, 2% at department stores and 3% on travel spending. Until January you can also get 1% on all spending at Amazon. However there is a £24 annual fee to take into account, unless you have a Santander 123 current account, in which case the card is free for a year.
[Compare top cashback credit cards]
Rewards
The great thing about cashback is that you can spend your rewards wherever you like. But if you’re a committed collector of certain loyalty points, then grabbing the card associated with that loyalty scheme can prove pretty lucrative.
Personally I do all of my shopping at Tesco, so it makes sense for me to use the Tesco Clubcard Credit Card for Purchases. You get five points for every £4 you spend in store and one point for every £4 spent elsewhere. You also benefit from a whopping 16 months of 0% interest.
Alternatively if you collect plenty of Nectar points then there’s both the Sainsbury’s Bank Nectar credit card and the American Express Nectar credit card to consider.
Personally I prefer the American Express as you earn extra points for all spending in Nectar sponsors, not just Sainsbury’s. You get up to four points for every £1 spent with Nectar firms, then two points for every £1 spent elsewhere. And you also get 20,000 bonus points if you spend £2,000 in the first three months with the card. However, there is a £25 annual fee to take into account too.
[Compare top reward credit cards]
Holidays
You could even bag a free, or at least discounted, holiday with the right choice of credit card. You can collect Avios (what used to be Airmiles) with the Lloyds Bank Avios Rewards cards (you get both an American Express and a MasterCard) for example. You get 1.25 Avios for every £1 spent on the American Express and for every £5 spent on the MasterCard. For the first six months you get double Avios on the American Express, but you do have to pay £24 a year for the card.
Still with the Avios scheme, there’s the fee-free British Airways American Express card. You get one Avios for every £1 you spend, plus 9,000 bonus Avios when you spend £1,000 in the first three months. And if you manage to spend £20,000 in a year, you’ll get a free companion voucher so a loved one can join you on the flight without having to pay anything!
Alternatively there are the Virgin Atlantic White and Black cards. The White card (or cards, as you get both an American Express and Visa) comes with no annual fee. You get one Flying Club Mile for every £1 spent on the American Express and for every £2 spent on the Visa. You also get 3,000 bonus miles with your first purchase.
Meanwhile with the Black card you get two Flying Club Miles for every £1 spent on the American Express and one mile for every £1 spent on the Visa. You also get 6,000 bonus miles with your first purchase. You do have a massive £140 annual fee to pay though!
[Compare top travel reward credit cards]
Where you shop
The Payments Council reckons that just 12% of all Christmas shopping will be done online.
That’s crazy. Not only can you get better deals online, you can also get paid to do your shopping via the links on cashback sites like Quidco and TopCashback. Indeed, the money you get back for this year’s shopping can go towards paying for next year’s presents! And you don't have to fight the queues or listen to Cliff Richard...
