All I want for Christmas is... credit?
If you only read one thing, make it this:
“If you’re taking a holiday or buying a large purchase and paying for it on a credit card, ensure you have the savings to pay it off.”
It’s the most wonderful time of the year, but between holidays and presents, the festive season is definitely NOT the most wonderful time of the year for your credit card. In the weeks leading up to Christmas, Aussies spend more than $50 billion dollars, with food and hospitality among the biggest money zappers. And that’s before you pay for the holiday…
“The last-minute dash for gifts can result in impulse buys for our families and ourselves – quite often on credit cards, and we don’t think about what we’ve spent until later,” says finance expert Cathryn Gross. “December is also the most popular time of year to book flights and accommodation, which often go on credit cards.”
Make a list, check it twice
Want to avoid the biggest Christmas pitfall? Gross recommends getting organised.
“Make a list of who you need to buy for and think about what you can afford to spend on each person,” she says. “Once you have thought of a gift in the right price bracket for each person, ONLY shop for those gifts – nothing more. You’ll thank yourself later.”
And as for that much-longed-for holiday: “If you’re taking a holiday and paying for it on a credit card, ensure you have the savings to pay it off on your return.”
Speaking of holidays, if you’re heading overseas, you have three options for your spending: cash, credit card or travel card.
If you opt for cash, Gross recommends doing your exchange in your home country, and ordering it at least a week before you go as banks won’t have every currency available.
Prefer to use your credit card? “Speak to your bank before you go about fees on foreign transactions. It’s not uncommon for these to be one to three per cent on every purchase,” Gross says.
“There are plenty of cards that don’t charge fees on foreign transactions, but read the fine print to ensure the bank isn’t making its money elsewhere – in annual fees or high margins on exchange rates.”
Another option is to use a travel card preloaded with foreign currency at an agreed rate.
“This is a secure way to travel with foreign currency and can be replaced if stolen, but you need to get yourself informed about the exchange rates before picking which travel card provider to use,” Gross says.
Moral of the story? Spend what you have, not what you don’t. That holiday or special purchase will feel sweeter without a side of debt.