CHRISTMAS shoppers have been warned of higher debt costs as major banks withdraw their best credit card deals.
There has been a dramatic reduction in the number of banks offering 0% credit cards, meaning shoppers could be stung by interest rates.
Consumers typically spend almost 30% more in December than any other month of the year, equating to an extra £740 at the checkout, according to the Bank of England.
Unsurprisingly, this sees more than third of people use credit or finance to fund their festive splurges.
But, experts at Fairer Finance have found there are far fewer 0% APR purchase credit cards available.
And those remaining on the market are less competitive today than they have been in recent years.
In December 2022 seven credit cards offered a 0% APR introductory period for more than 20 months, including RBS, NatWest and Barclaycard.
In November 2023 only Barclaycard offered a 0% deal for more than 20 months with the average time period for the rate falling to just 250 days.
With Barclaycard having now withdrawn this offer, this Christmas only Tesco Bank is offering a 0% deal for more than 20 months.
Fairer Finance’s researchers also observed a steady increase in interest rates.
The average representative APR for 0% purchase credit cards has risen from 21.9% in 2022 to 24.9% today.
The maximum APR has climbed even further, jumping from 27.9% in Q4 2021 to 29.9% this Christmas.
This means that when the 0% period ends consumers can be facing big bills if they have not cleared their borrowing completely.
James Daley, managing director of consumer group Fairer Finance, said: “The festive period can often lead to significant financial pressure, and the shrinking availability of long-term 0% purchase cards means that consumers need to carefully consider their options.
“It’s disappointing that lenders are continuing to push up APRs – even as base rate has begun to fall from its peak.
“While most people will be taking out these cards hoping to pay them off before the 0% promotional period ends, the reality is that many won’t achieve that – and will now be left paying even higher rates once their offer expires.
“If you have the choice, it’s definitely worth choosing a card with a lower interest rate, to minimise the cost in case you’re unable to pay off or switch your debt by the end of the offer.”
There was another blow to shoppers this Christmas when American Express announced it would no longer offer £5 for every £15 spent at small businesses in December.
Last month also saw bad news for savers as major banks prepared to slash their rates.
The move followed the Bank of England’s (BoE) decision to cut the base rate from 5% to 4.75%.
Elsewhere research commissioned by Skipton Building Society found that four in 10 households have relied on the generosity of others to get through the Christmas period – with help ranging from hand-me-down toys to food packages.
By James Flanders, Consumer Reporter
UK Finance reports that we spend a whopping £2 billion a month using our credit cards.
While that little strip of plastic makes everyday spending easy peasy, it comes at a huge cost.
According to The Money Charity, the average credit card debt sits at £2,485 per household or £1,312 per adult.
And if you’re stuck on a credit card with a high APR and only making the minimum repayments, you could be forking out hundreds of pounds extra in interest charges.
For example, if you owe £1,312 on your credit card and are charged 24.8% APR.
If you don’t make any more transactions and pay £100 a month in repayments, you will pay off the card by September 2025 but at £207 in interest.
However, by hunting around for a better deal elsewhere and switching to a balance transfer credit card with a lengthy interest-free period, you can save yourself £162.
If the same person was accepted for a 28-month-long zero-interest credit card with a 3.4% balance transfer fee and made the same £100 repayments each month.
They would pay off the debt sooner, in July 2025, and only fork out £45 towards the 3.4% balance transfer fee.
Before taking out a new credit card or increasing the amount you borrow, it’s vital to consider the consequences.
You should only borrow money if you can afford to pay it back.
It’s always vital to ask yourself if you need to borrow before committing to a new credit card, personal loan or overdraft.
If you use a credit card, I’d recommend that you always pay off your balance in full at the end of each statement period.
Lenders have a responsibility to help customers who are in debt.
If you’re in a debt crisis, your first point of call should be your lender.
They might help you out by offering you a reduced interest rate or a temporary payment holiday – so check in with your lender if you’re struggling.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories
