With just over a month to Christmas, many Aussies are whipping out their credit card at the checkouts more and more to cover the costs of the festive season.
But according to recent Mozo data, we have a pretty precarious relationship with our plastic friends with a money wasters survey revealing that avoidable credit card interest costs us a nationwide $5.5 billion, working out to almost $700 per family, per year.
“Aussies love to use their plastic, particularly over the Christmas period. But if they’re not careful they will rack up a hefty credit card bill and no one wants to start a new year with that kind of debt,” said Mozo Director, Kirsty Lamont.
While you might have already started to spend, it isn’t too late to avoid some of the more costly credit card errors. So here are five common Christmas credit card mistakes and how to avoid them this holiday season.
1. Being late on repayments
In the thick of your Christmas shopping and with a bunch of other bills to pay it can be easy to miss out on your monthly credit card payment, but this could cost you. According to the Mozo database, the largest credit card late payment fee going round is worth a whopping $35!
How to avoid it: Set up automatic payments from your transaction or savings account and avoid the late fees.
2. Only making the minimum repayment
The temptation to spend big and spread yourself thin - meaning you can only make the minimum repayment for a few months - can result in accruing a tonne of credit card interest to bring in the new year.
How to avoid it: Establish a Christmas budget that you know you can pay off in full each month - this might mean spreading out some of the bigger expenses - and no matter what stick to it!
3. Maxing out your credit card
Food, beverages, presents and holiday expenses all piled into one quarterly splurge - there is no wonder Aussies max out their credit card over Chrissy. Not to mention the overdraft fees! This common mistake also has far-reaching implications for your credit score and may affect how lenders view you as a borrower in the future.
How to avoid it: Establish a holiday budget that sits within 30% of your overall credit limit. You will be able to cover your entire balance and also keep your credit score squeaky clean.
4. Hitting the ATM for a cash advance
In the days leading up to Christmas you might find yourself in the midst of grocery shopping mayhem but hitting the ATM or making any other cash advances is going to cost you a pricey cash advance fee and you’ll also start paying interest on that money straight away.
How to avoid it: Reach for your debit card instead as these cards often come with fee-free ATM withdrawals.
5. Swearing off credit cards for good
The horrors of last year’s credit card bill might have you wanting to chop up your plastic this time around but credit cards are a great tool to help you budget as long as you’re using the right one responsibly.
How to avoid it: Keep your credit card and shop around for the one that suits you best. In saying that, it is important that you establish a workable, realistic budget and keep track of your spending throughout the summer months.
If you’ve already tallied up a bit of credit card interest and don’t want to pay the lofty interest rates associated with some cards, check out a few of the popular low rate options on the market below.