Shoppers splashing out on credit cards this Christmas should set themselves a strict budget and maximise their credit card’s interest-free days to keep a lid on their spending.
Used properly credit cards can come in very handy when you have a lot of expenses such as Christmas, but they should not be an excuse for completely losing control of your spending.
Whilst interest free periods provide you some extra time to pay, shoppers should be careful not to over-indulge and work to the budget they have set themselves.
Interest rates on cards differ significantly, the minimum purchase rate available is 8.99 per cent compared to the maximum purchase rate of 23.5 per cent. The average interest rate is about 17.5 per cent.
Credit card users should visit the moneysmart.gov.au website and use their credit card calculator to work out monthly repayments.
On average, credit card debt of $4200 with the highest rate of 23.5 per cent, if the card user only paid the minimum amount each month at $108,would take nearly 30 years to pay off.They would fork out more than $16,000 in interest charges.
With the same debt on the lowest rate card of 8.99 per cent, the card user would start with minimum repayments of $85 per month and pay significantly less in interest at $6,300.
It’s critical customers make the minimum monthly repayments on their cards.
Experts also urge customers to pay their credit card bills before the due date to ensure they aren’t hit with a late payment fee.