Credit card debt can quickly get out of control at Christmas time, especially if you’re a big fan of online shopping. Here are our top tips to managing credit card debt this holiday season.
• Use your credit card only when you have the cash
A credit card is not free money. It sounds pretty simple, but lots of people use their credit card to pay for things they cannot afford. Only use your credit card if you have the cash to pay for the item there and then. And make sure you pay off the entire bill at the end of the month. A credit card does not give you additional funds, it just allows you to keep cash in your bank account for a little longer – which can help you save on interest if you have an offset account attached to your home loan.
• Resist impulse shopping
Before you hit the shops, make a list of what you need and then stick to the list! Resist the urge to add impulse purchases, unless of course you actually need them. We’re all pretty good at purchasing things online these days, so do some research to make you’re getting things for the right price.
• Set a limit
When you’re buying presents, planning nights-out or holidays, try to set a limit on how much you can spend. Also consider reducing your credit card limit down to the bare minimum to avoid the temptation to spend more that you can afford. We don’t want to be a Christmas Grinch, but maybe it’s time to think about your longer term priorities.
If you’ve worked really hard all year to save for a house deposit, spending more than you intended at Christmas time means you just have to ramp up your savings efforts in the new year.
• Be aware of credit card interest-free deals
Some of these offers are designed to trap you into high interest later on, so make sure you know what you are getting into. Circumstances can change quickly and if you can’t pay the balance during the interest-free period, you will be left struggling to pay higher interest charges.
If you are using an interest-free credit card to consolidate existing credit card debt, don’t use the interest-free credit card for new purchases. Pay off the debt as fast as you can, don’t add to it.
• Seek advice early
If you do find yourself in a position where you need to consolidate credit card debt, talk to us sooner rather than later. We might be able to show you a few options you haven’t thought about.
