WE ALL go gooey-eyed when we hear "I'm dreaming of a white Christmas", but a red Christmas is one which keeps us awake at night.
Banks have rubbed salt in the wound of high mortgage and utility bills by pushing up the cost of credit cards in the r
un-up to Christmas, when family budgets are at their most stretched.
Sixteen cards have increased interest charged on purchases, while others have hiked fees that customers must pay to transfer an existing credit card debt to them from another bank, according to financial researchers at Moneyfacts.
Others have reduced the interest-free periods which can allow up to 59 days' grace before paying for your purchases, while some have increased the fees they charge for using your card abroad or making cash withdrawals.
Moneyfacts' credit card expert Samantha Owens says: "Banks have been pushing up the cost of credit cards, so customers who need to borrow for Christmas could find themselves paying more than they expect. There are certainly far fewer zero cards available."
On top of all that, cards are more difficult to come by than ever as the credit squeeze tightens, with at least half of all applications rejected. This is maddening, as the right credit card can slash the cost of Christmas.
If you want to bag yourself a plastic bargain before the festive season gets under way, you must move quickly. Most card issuers admit it can take 10 working days or longer for an application to be processed.
Delay your payments Most cards come with between 54 and 56 days' interest-free credit, provided you have settled your bill in full the previous month.
If you time your Christmas purchases carefully you can delay bills right into February. With credit card bills there are two key dates: the billing or statement date, and the payment date.
The interest-free period runs from your last statement date, which is usually about two weeks before your payment date. So, say your statement date is somewhere in the middle or second half of December – if you delay purchases until after the December statement date, your next statement shouldn't arrive until the middle or second half of January, and won't need to be paid until early February.
But to work this wheeze you will need to know precisely how many interest-free days come with your card, as well as your statement date, which may not be obvious. If you don't know your statement date, you can ring your card issuer and ask.
MBNA, for example, has recently cut interest-free credit from 56 days to 50 days for new customers who took out cards after September. Elsewhere, some Virgin Money and Co-op cards only allow 46 days' interest-free grace.
Big spenders Big families mean big shopping bills, but if you need to spread the pain there are still some cards which won't charge you interest until well into next year.
Halifax All In One Mastercard will charge no interest for 10 months both on goods you purchase as well as balances you transfer across from another card company. The bank says applications are taking up to two weeks to process. At the end of the 10 months, interest accrues at 15.9%.
Marks & Spencer Money also has a Mastercard offering zero interest for 10 months on purchases, with interest at the end of the discount period charged at 15.9%. The quickest way to get one is via the stores, where applications take seven to 10 days.
Otherwise, Lloyds TSB Advance Mastercard, Barclays OnePulse Visa, AA Online Mastercard and Tesco Personal Finance Bonus cards allow you to borrow for free for six months. After that, interest is charged at 11.9% at Lloyds, 14.9% at Barclaycard and 15.9% at both Tesco and the AA.
Already in debt? If you are already sitting on big credit card bills you cannot pay, with interest clocking up at an alarming rate, then you should try to switch the balance to a zero-interest card.
However, the process is fraught with danger. The first pitfall is that these cards are not really free as you must pay a transfer fee, so don't forget to compare these too.
The other pitfall is what happens if you use this card to make purchases. This is known in the business as the repayment priority order.
If you have a card charging nothing for balance transfers but, say, 15.9% on purchases, any repayments you make on the card will first reduce the balance, which is charged the cheapest interest (in this case zero), thereby cutting any advantage you hoped to gain by making the 'free' transfer. Hence, a repayment priority order.
The smart way round this is to get two cards and use one for purchases while leaving your transferred balance to enjoy as much zero interest as possible.
For example, the Tesco card charging six months' interest-free borrowing on purchases appears more generous on balance transfers, allowing 14 months' zero interest. However, after six months any repayments you make will reduce the transferred balance while charging interest at 15.9% on the purchases. This reduces the benefit of transferring a balance, for which you have paid a transfer fee of 2.9%.
The Halifax's All In One card gets round this by charging zero interest for 10 months on both transferred balances and purchases.
Barclays' OnePulse has a different approach again by offering separate cards for balance transfers and purchase. However, a spokesman said it is unlikely that a customer would be offered both.
Finally, make sure the interest-free period begins at the time of transfer, which most do. Virgin Money charges no interest for 16 months, but this is from the time the card is issued, with a 2.98% transfer fee, moving on to 16.6% interest at the end of the 'free' period.
Bag a reward for paying in full If you always settle your bill at the end of the month you can cut your shopping bill further with a cashback card, which refunds a percentage of your spending.
The most generous in the run-up to Christmas is American Express Platinum Cashback, which gives you back 5% of whatever you spend during the first three months. After that you get a 0.5% refund up to £3,500 per year, 1% between £3,501 and £10,000, and 1.5% above that.
However, a word of warning: not all retailers accept American Express. If you do want one, applications online or over the telephone are taking 10 working days.
Elsewhere, Egg Mastercard will refund 1% of your annual spending.
The best of the rest is a 0.5% cashback with Barclaycard OnePulse, with cashback on monthly spending of up to £6,000.
Alternatively, Bank of Ireland will rebate 0.5% on annual spending of up to £15,000, and Smile Classic Visa gives unlimited cashback of 0.5% of your annual spending.
Using your card abroad When you use your card abroad, most banks levy a 'foreign exchange loading' of about 2.75% when the transaction is exchanged from a foreign currency into sterling.
However, Nationwide and Abbey have cards which do not levy a loading, thereby cutting the cost of hotel, restaurant and shopping bills when enjoying a festive break abroad.
Avoid unnecessary fees If you miss a payment, pay late or spend over your credit limit you will be hit by penalty fees, of typically £12 on each occasion.
It will pay you to keep an eye on your credit limit and pay your bills in plenty of time.
Before you apply
Banks are getting fussier about who can have a credit card, but you can boost your chances with a few simple steps:
• Check out your credit reference file to make sure there are no mistakes on it
• Get yourself on the electoral roll
• Sort out any disputes with other card issuers or banks
• If you are already over-extended with loans with different organisations, try to reduce them, if only temporarily.
