Christmas and peak holiday time is now just a month away and many of us Australians will be turning to our credit cards to help cover the cost of the festive season period. Whether you’re planning on using your credit card this season to buy gifts, enjoy a night out with friends, or to purchase tickets to a great NYE party, the key is being card smart.
Here are some of the biggest credit card mistakes people make this time of year and some tips on how you can avoid them and... still have fun.
#1: Spend just to earn points
A rewards credit card can be a fantastic way to earn a freebie on your everyday Christmas spending, but according to Mozo Director, Kirsty Lamont, many people fall into a points earning frenzy, putting everything on their credit card without realising that if they don’t pay their balance off in full, the interest charges will outweigh any rewards earned.
“If you’re not going to be able to pay your balance off immediately post Christmas, keep your rewards card in your wallet and instead pay for purchases with a low interest credit card,” she said. “The 10% difference in the interest rate you’ll pay will more than make up for any points you would earn towards a reward.”
#2: Don’t track your spending
One of the downsides to the cashless ‘tap-and-go’ world is that it can be pretty easy to rack up a significant credit card bill without realising it. But rather than just handing over your card time and time again until it gets rejected at the cashier or you actually take the time to look at your growing balance, take advantage of many of the great tools and alerts that are now available with many credit cards.
For instance, you can now set up lock and block features that will either limit your spending to a set amount or block purchases altogether. Or sign up for balance alert notifications that get sent straight to your smartphone and keep you updated on your balance throughout the month.
#3 Buy now, regret later
Everyone loves to give (and receive) gifts this time of year, but we can go a little overboard at Christmas buying stocking stuffers for relatives and other impulse buys with our credit cards. This is one of the easiest ways to rack up dumb debt says Lamont.
“Before you buy anything on your card, you should make sure that it is not only worth the sticker price, but if you are going to be paying it off for several months, the interest charges as well,” she said.
“That $40 joke Santa t-shirt won’t be so funny in 6 months time when the person you bought if for has already put it in the charity bin but you’re still paying it off.”
If you need to spread the cost of Christmas, think about getting a 0% purchase rate credit card so that any expenses you do put on the card, can be paid off over a longer period of time without costly interest charges.
#4 Hitting the ATM
Using your credit card for a cash advance is one of the most expensive options around as cash advances have higher interest rates than purchases and upfront fees to match. The good news is that most stores and venues these days accept card payments card so rather than withdrawing the cash to pay for goods, use your card and avoid copping the higher fees and interest charges that go with cash advances.
#5 Check out
While everyone should check out for a few days over the Christmas break to catch up with friends and family, you’ve got to remember that your bank won’t be taking any time off. Be sure that if you’ve got bills due you pay them on time. Credit card late payment fees can be as high as $35 so you’re better off putting this money towards a good bottle of wine with friends than in bank fees. Even if you just make the minimum repayment this is better than getting a black mark on your credit file and paying a late fee.