Thrifty Loans

Last year we Brits spent an average of £500 on Christmas presents. Given the way 2007 has gone many of us are going to be hard-pressed to spend the same amount this year. With the credit squeeze and difficulties getting mortgages and loans, the best advice is to steer clear of debt. How about making money out of purchases instead?

You could take out a cashback credit card which give you money back for every pound you spend. However, be aware that cashback deals are usually only worthwhile if you pay your balance off in full each month – otherwise it’s a false economy. There are some cards that offer 0% interest on purchases. If you take out one of these cards, take the money you would have spent and put it into a savings account to make money. If it’s a cashback and 0% on purchases card, then you’re getting twice the benefits!

The best cashback deal at the moment is available from Capital One, offering 4% back on all purchases for three months, and then it’s 1%. If you made all your Christmas purchases on this card, you could get back £20 on your £500 spend. Of course, you’ll have other (non-Christmas) purchases too, so a spend of £2,000 a month for three months would give you £240 back in three months. To get this card you need to have a blemish-free credit rating, and a credit card with a limit of £5,000 already.

Abbey has a card offering 5% cashback, but only for the first £1,000 spent in major supermarkets until 31 January 2008. In addition, there’s a 0% interest rate for three months, and 0% on balance transfers for a year (with a 2.5% fee).

There is 2% cashback from the Barclays Platinum with Cashback card on supermarket and petrol spending (0.5% on other purchases), but there’s a cashback limit of £15 a month for petrol and supermarket spending, and the same for other spending.

American Express Platinum MoneyBack card gives 3% cashback for the first three months, which then reduces to 1.5% if you spend more than £10,000 a year. The APR is 15.9% and there is no balance transfer deal.

Of course, spending will carry on after Christmas for regular items, so you might want to look for the longest 0% deal on purchases. It is then wise to set up a direct debit to pay the minimum each month and make sure you repay all the debt just before the interest free period ends. Make the most of it!