How To Escape Costly Christmas Debt

Don't be tempted to pay more than you should for credit this Christmas.

Christmas is an expensive time of year which can often lead to large credit card bills. The festive season gives some lenders the perfect opportunity to peddle credit, particularly to those with less than perfect credit histories.

Borrowing is becoming more difficult in the wake of the credit crunch with mainstream credit providers tightening their lending criteria. This can leave borrowers with poor credit records out in the cold. Specialist 'bad credit' companies (aka sub-prime lenders) know this and will go all out at this time of year to try to tempt you to borrow from them.

One recent example I came across the Vanquis Visa Card - is currently inviting online applicants now with an e-mail that asks 'Fancy an extra £2,000 to spend this Christmas? Response in 1 minute'.

I can see how people get lured in. It's the business of these companies to lend to people who have been turned down for credit elsewhere. You might think they're a lifeline, but there's one very big catch.

If you apply for a credit card from a sub-prime lender, be prepared for interest bills that could really go through the roof. Vanquis, for example, charges an APR (annual percentage rate) of between 39.9% and 59.9%. Considering most traditional credit card companies typically charge around 15% APR, this is a long way off a competitive deal.

The card targets people who have already had credit problems and those with County Court Judgments (CCJs), along with lower earners, people who are retired and the unemployed. And what concerns me most is that the card is also aimed at people who have never had credit before and therefore have no credit history. This could attract young, first-time borrowers who might not fully appreciate what they're getting themselves into.

If you've been refused credit before and you really must use one of these cards then I strongly suggest you pay off your balance in full every month. That way you'll avoid paying any interest at all. If you can't do that, then pay off as much as you can reasonably afford.

Please don't just stick to the minimum payments because it could take what feels like an eternity to clear while the interest on your debt racks up.

If you know you won't be able to pay off your bill in full every month, but do need to borrow extra cash this Christmas, the best thing to do is to apply for a 0% on purchases credit card from a mainstream lender. If you use this card for new purchases, you will not be charged any interest for a set period (usually 12 months), so you have longer to clear your debt.

Good luck!

> Visit our credit card centre to take out a credit card offering 0% interest on new purchases