The Xmas grinch: credit card sign-up bonus offers a potential debt trap

Mozo has predicted that Aussies will spend a record $28.2 billion this silly season, and credit card providers are jumping on the spending bandwagon by offering a dizzying array of signup bonuses to Christmas spenders.

The surge in new credit card signup incentives as Christmas approaches includes cashback, gift card and free flight offers.

While there are plenty of freebies on offer at this time of year, Mozo Director Kirsty Lamont has warned shoppers to be aware of what a lingering credit card balance could mean for their bottom line.

“Shoppers might think they’re being savvy by scoring freebies while signing up for a credit card to pay for Christmas,” she said. “However, there is a danger that people could find themselves in a debt trap if they can’t pay off their Christmas spending frenzy and have to fork out hundreds of dollars in interest.”

Mozo estimates that the average Aussie cardholder’s credit card debt will hit $4,225 after the Christmas splurge. And at the average interest rate of 17.41%, shoppers could be paying $736 in interest over a single year as they pay off their Christmas shopping.

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Mozo found that 22 of the 28 credit cards offering sign up perks also came with above average interest rates, and 18 came with annual fees over $100.

“Before snapping up a seemingly irresistible sign up offer, shoppers should weigh up the value of the freebies on offer against the cost of interest and annual fees,” Lamont said.

Pre-Christmas credit card cashback offers

Provider and cardPurchase rateAnnual feeCashback offer (terms and conditions apply)
Suncorp Clear Options Platinum20.74%$1695% cashback (up to $250)
Woolworths Everyday Platinum Credit Card19.99%$49$50 Woolworths Gift Card plus 10% off first weekend shop in-store each month
Citibank Simplicity19.99%$05% cashback (up to $100)
Virgin Money No Annual Fee Card18.99%$0$100 cashback
American Express Essential Credit Card14.99%$0$50 credit
ANZ Low Rate13.49%$58$100 cashback
ANZ Low Rate Platinum13.49%$99$250 cashback
Commonwealth Bank Low Rate Gold Credit Card13.24%$89$250 cashback
Commonwealth Bank Low Rate Credit Card13.24%$59$250 cashback

*Correct as of 29 November 2016. Terms and conditions apply to cashback offers such as minimum spend, deadlines for minimum spend and time limits on cashback.

One of the best options for shoppers who want to charge their Christmas shopping to plastic, Lamont said, is still a low rate credit card.

“There are a few cards offering signup perks that have lower interest rates and annual fees but for shoppers who will take a while to pay off their Christmas largesse, a low rate card will always be the best option, with rates as low as 8.99% keeping interest repayments to a minimum,” she said.

So before you hit the shops to start your Christmas spending, make sure you head over to Mozo’s credit card comparison table to find the perfect credit card.