Sadly, Photoshop isn't free D; (The one I use at least). It may be a rumor but I think they released free versions of Photoshop (cs2 and cs3). Before photoshop though, I used Gimp, and it is seriously just like Photoshop, except it's 100% free download. ^_^ And there's a website that is like Online Photoshop called "pixlr". It's great and really handy!
What do you use?
And when you save, make sure you save as ".png" or the highest ".jpeg" or ".jpg". Mine used to be blurry when I saved, until I started messing with my saved file, and there, it isn't as blurry with png settings. ^^ If you need help, feel free to ask me anytime <3 I would love to help.
And what?! It's perfect! I love the Christmas theme! Good luck on the contest!