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Credit Cards & Loans

Zero interest terms cut as Christmas shopping season begins

Emma Lunn
Written By:
Emma Lunn

Christmas shoppers reliant on credit cards have less time to pay off their debts before being charged interest compared to a year ago.

The longest interest-free period on a purchase credit card currently stands at 26 months, while the top 0 per cent offer a year ago was 29 months, according to Moneyfacts.

As a result, those using credit cards this year need to pay off the outstanding balance three months quicker than a year ago.

The longest 0 per cent interest period at the moment is MBNA’s limited 0 per cent transfer and purchase Mastercard which offers 26 months interest-free. Barclaycard’s platinum all-rounder Visa and Sainsbury’s Bank dual offer Mastercard both offer 25 months

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Credit cards remain not just a convenient way to spend for the everyday consumer, but they also offer protection in the event of a dispute with a purchase of goods or services. In addition, consumers can give themselves more time to repay goods if they apply for an interest-free offer. As Black Friday looms, this week may be a popular time to apply for one such offer.”

The Black Friday and Cyber Monday sales offer significant savings on high-end goods, such as electronics. If consumers have little savings or means to buy high-cost items, a credit card could be a good alternative. However, it is important that they work out a realistic repayment plan so they don’t regret the purchase later down the line.

“Shoppers may not necessarily use these sales to buy others gifts for Christmas, in fact, according to PwC, only 20 per cent of consumers buy most of their presents over this period. Therefore, shoppers could still use the plastic again to cover the festive spend – particularly if they have some time left utilise an interest-free offer,” said Springall.

Anyone borrowing on a 0 per cent card should work out how much they need to repay each month to repay the debt in full before the end of the 0 per cent interest period.

For example, shoppers would need to repay around £116 per month to pay back £3,000 over 26 months.

But if a borrower made a purchase of £3,000 on a card charging 20.9 per cent APR and repaid just £100 per month, the debt would linger for more than three years and cost £1,114 in interest.

This demonstrates how important it is for borrowers to clear their debts faster or take advantage of an interest-free offer to spread their repayments.