Gocompare.com suggests ways bargain hunters can make the most of credit cards:
- Interest- free borrowing’ for as long as 27 months by using a 0% purchase credit card;
- Credit cards give you extra protection for items costing over £100.
Online shopping phenomena Black Friday and Cyber Monday have been wholeheartedly embraced by UK shoppers looking to grab a bargain in the run up to Christmas. Black Friday 2014 was a record day for online sales (e-retail industry experts estimate over £810m* was spent) and predictions are that Black Friday 2015 will see the first £1bn online shopping day in the UK.
Black Friday typically sees retailers offering massive discounts on tech goods while shoppers can bag bargains on fashion, shoes and home electrical appliances on Cyber Monday. This year Black Friday falls on 27 November and Cyber Monday on 30 November. As retailers and shoppers gear-up for this year’s sales bonanza, Gocompare.com considers how shoppers can make the most of their credit cards to protect their purchases and spread the cost.
The potential for ‘interest-free borrowing’
Provided you repay the balance on your credit card in full every month, you won’t be charged interest on the purchases you’ve made. Shoppers looking to spread the cost of their purchases can also do so opting for an interest-free credit card.
0% purchase credit cards
0% purchase credit cards offer new customers 0% interest on new purchases (and balance transfers) for a limited period - this varies between cards but it can be as long as 27 months for purchases. Provided they repay the debt within the interest-free period, every penny goes towards paying down the debt – not in interest charged by the card issuer. However, once the introductory period has ended, the card issuer charges its standard interest rate. Rates vary between providers so check any terms and conditions carefully.
Balance transfer credit cards
A balance transfer credit card allows you to move an existing debt over to a new card that charges either a very low interest rate, or gives you an interest-free period. Some balance transfer cards have an interest-free period of over three years. You usually pay a balance transfer fee in return for moving your debt. This is calculated as a percentage of the debt you're transferring and varies from card to card. If you do not clear the balance in full by the end of the 0% period, you will be charged interest on the remainder of the balance so make sure you know what the rate of interest charged is at the end of the interest-free period.
Cashback and rewards
Cashback cards and reward cards can be a good way of getting a little bit back on your shopping, but only if you repay your balance in full at the end of the month. Otherwise, any benefits you receive are quickly eroded by interest payments.
Cashback cards allow the holder to earn back a percentage of what they spend as an annual bonus, typically between 1% and 3% of the amount spent on the card, subject to certain restrictions. The cashback is usually credited back to your account on an annual basis. However, the money earned back will be much less than the card’s annual percentage rate. So, unless you clear your balance at the end of the month, interest charges soon outstrip the money you earn on your shopping.
Reward credit cards pay you a specific reward for your spending – anything from air miles to supermarket loyalty points. However, the cost of interest payments on outstanding balances will more than cancel out the value of any rewards you earn and certain purchases and cash withdrawals may not earn rewards.
Section 75 protection for items costing over £100 on credit cards
One of the big benefits of using a credit card is the added protection (under Section 75 of the Consumer Credit Act) they give for items costing over £100. Your credit card company is jointly responsible with the retailer for the services or goods you have paid for. So if, for example, the retailer goes bust, or you received faulty goods, you may be able to ask your card company for a refund. There are certain circumstances where Section 75 protection may not apply, such as where an additional cardholder makes a purchase, or spending via payment services or group buying sites such as PayPal, Amazon Marketplace and Groupon, and purchases through an agent or third party. Read more in our guide.
Matt Sanders, Gocompare.com’s credit card spokesman, commented: “Black Friday and Cyber Monday are marketing inventions imported from the US to encourage people to shop early on in the Christmas season. But, from last year’s sales figures, it’s clear that UK retailers and shoppers are cashing-in on the pre-Christmas sales.
“As well as researching the best deals on the electrical goods and fashion items up for grabs on Black Friday and Cyber Monday, shoppers should take time to consider the best way to pay for their bargains. Credit cards can be a great way of spreading the cost of sales and Christmas shopping and there are some really competitive deals available at the moment – particularly on interest-free cards, but shoppers must make sure they can afford to make the repayments, particularly as the bills for spending in November and December are likely to hit the doormat in January.”
Visit Gocompare.com for more information on the type of credit cards available and to compare products.
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Notes to editors:
*Separate figures from Experian and IMRG (the UK’s association for e-retail estimate over £810m was spent online on Black Friday 2014, making it the biggest ever day for online sales.