Christmas on Credit

Christmas is a time of giving and receiving, but as we approach this most dangerous time of the year for credit cards we’d like to give you a quick refresher on the best ways to use your plastic so you don’t end up with a Christmas hangover of the financial kind.

Time doesn’t cost money

Christmas usually means getting together with family and friends, so instead of buying lavish gifts for each other what about everyone in your family or group agreeing not to buy gifts this year and spend time having fun together? There are so many fun gift exchange games that can get your Christmas day off to a great start. Or if that isn’t a popular idea, maybe each person buys just one gift for one other person. Suggest a limit is placed on how much each person spends to keep it manageable and fair.

Remember it’s not about the presents, it’s about the presence.

Cash advances cost more

Using your credit card to withdraw cash will incur an interest charge immediately and at a higher rate than on purchases. There is no interest-free period on cash advances. If you must take cash off your card for an emergency, repay it as quickly as possible. Don’t wait for your statement.

Rewards programs are not free

Credit cards with a “rewards program” come with an annual fee. This charge can be $100 or more per year, plus extra for any additional cards on your account. If you have a “rewards” card but haven’t been rewarded for your use in the past year, it might be a better idea to exchange your card for one without all the bells and whistles and no annual fee.

Read the fine print

Credit providers are required to state their terms and conditions in simple English so it is a worthwhile exercise to read through these documents when you are shopping around for a new card or when you are advised of a change to your current service. A slight misunderstanding can cost you money or reduce the benefits your card was supposed to deliver.

Credit cards are an excellent way to manage your Christmas buying.  The secret is to keep a record of your spending so the statement isn’t a complete surprise and then pay off the full balance every month; if you can’t pay off the full balance of your credit card each month you are spending more than you are earning, which is never a wise move.

My top tip for getting through Christmas without ending up in debt, is to open a Christmas club account in early January, saving just $20 a week which will add up to over $1,000 by the year end.

If you are keen to make smarter financial decisions book an obligation free appointment now.

Christine Swanson is qualified professional adviser who specialises in retirement planning – click here to start making smarter financial decisions now!

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