I and A Mag Dec19

Five Ways to Pay for Christmas
The cost of Christmas can take away some of the
magic of the festive season if you’re not careful,
as well as causing serious financial problems well
into the New Year. Saving in advance is obviously
the ideal, but if you’ve not been able to do so for
this Christmas, there may still be an option that
can reduce your credit card bill a little.
Protection for your Christmas savings
Supermarket savings schemes and Christmas clubs are a
straightforward way to put money aside for Christmas, but
there’s always a risk that the operating company or retailer
could go out of business.
The money held in Christmas clubs isn’t protected by the
Financial Services Compensation Scheme (FSCS) as these
clubs aren’t savings accounts – they’re a method of paying for
goods and vouchers in advance.
So whether you want to quickly pay for Christmas 2019, or take
your time and save up for next Christmas, here are five ways to
relieve some of the stress of financing what many regard as the
most wonderful time of the year.
1. 0% purchase credit cards
If your credit rating is good you may be able to obtain a credit
card with 0% interest to pay for your Christmas purchases this
year. You need to be careful not to miss a payment on the card,
however, as you’ll lose the interest-free deal and will have to
pay a high rate of interest on the remaining balance.
Interest-free deals are also time-limited, but if you don’t miss
a repayment and can pay off your spending in total before the
deadline, you won’t pay any interest, which is essentially the
same as having an interest-free loan.
Some providers even offer credit cards with 0% interest in
addition to a 0% balance transfer, so you can move an existing
balance over to a new card and benefit from no interest. Again,
you’ll need to be certain that you can pay off the entire balance
before the deal ends or you’ll be hit with a high interest rate.
2. Regular savings accounts
Regular savings accounts allow you to save a little money each
month, and are a tried-and-trusted way to ease the pressure
on your finances. They also offer a higher rate of interest than
‘standard’ savings accounts.
Typically, you’ll need to hold a current account alongside
the regular saver so it may be worthwhile switching banks if
necessary, or finding out if your current bank offers this type of
savings account. At the time of writing, 5% interest is available
on some regular savings accounts, including First Direct and
M&S Bank.
Local building societies also tend to offer good rates to regular
savers, so you could investigate whether there’s one near you.
Potential downsides of regular savings accounts include the
fact that you won’t be able to access your money early if you
need it, and you must save a minimum sum each month.
3. Instant-access savings accounts
Saving for Christmas in an instant-access savings account
means your money isn’t tied up if you need it during the year.
This can be both a blessing and a curse, however, particularly if
you think you might spend the money on non-essentials.
Although savings interest rates are currently very low, an
instant-access savings account does offer more flexibility,
whilst also providing a safe place for your money that’s
separate from the everyday funds in your current account.
4. Credit unions
Credit unions are non-profit financial organisations that
sometimes offer Christmas savings clubs to their members.
Similar to ‘traditional’ Christmas clubs, access to your savings
is restricted until a few weeks before Christmas, and you can
save in a number of ways.
Some credit unions allow you to save directly from your wages,
but you could also set up a direct debit or pay in over the
counter. Crucially, credit union savings accounts are protected
by the Financial Services Compensation Scheme (FSCS) in the
same way as bank and building society accounts.
One potential downside of using a credit union to save for
Christmas is that you don’t earn interest on your money.
Credit unions offer annual dividends to their members, and the
amount of these is reliant on how well the credit union has
performed during the year.
5. Piggy bank or money jar
If you’re disciplined with money and know you won’t be tempted
to spend it during the year, a piggy bank could provide the
answer to Christmas saving. Regularly emptying your pockets
or purse of change adds up to a surprising amount if you start
in January and save throughout the year.
With so many beautifully decorated coin jars and money pots
now available, it can be fun to save in this way. You could even
buy novelty piggy banks for the children so they learn the habit
of saving, or help them decorate their own mason jar.
If you start in the New Year and save regularly you’ll easily save
for some or all of next Christmas’s expenses, breathing a sigh
of relief when you’re debt-free in January.
www.moneysavingexpert.com/savings/best-regular-savingsaccounts
www.fscs.org.uk/what-we-cover/credit-unions
by Ann Haldon
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