Interest free Christmas shopping: Naughty or nice?

As the Christmas season rapidly approaches, it seems like everyone, everywhere is trying to get you to sign up to their interest free offers from home appliances to car finance.

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Our banks are no exceptions. In fact, comparison website Mozo.com.au found that the number of credit card offers for 0% on purchases has nearly doubled over the past two years.

While the prospect of not having to pay for your Christmas shopping for 6 months or more may seem enticing at first glance, it’s important to know how to use these offers wisely so you don’t end up being stung by high interest rates and falling into a debt trap.

What’s nice?

Christmas is one of the happiest times of the year but it can also be very financially straining on Aussie families who have to shoulder the expense of everything from presents to lunch.

In fact, Aussies spent a collective $45 billion in the six weeks leading up to Christmas last year – that’s a whopping $2,500 per person!

In case you don’t have $2,500 on hand, using a zero interest credit card for all your Christmas shopping needs may be a savvy strategy to ease the financial strain on your family by spreading the costs of the festive season over a few months.

Since you won’t be charged interest on any purchases until the 0% purchase term expires, you’ll have more breathing room to pay the debt off than you would normally get with a standard 55-day interest free period.

Mozo’s database found several cards with generous 0% purchase terms of up to 15 months.

What’s naughty?

Like the festive season, these honeymoon offers do eventually come to an end and cardholders who haven’t paid off their purchases can find themselves in the dangerous situation of having to pay sky high revert rates of 18% on average.

To survive the festive season in one financial piece, here are 5 helpful tips on how to use an interest free credit card wisely this Christmas:

Choosing the right plastic: When choosing an offer you should consider features such as the length of the 0% purchase term and revert interest rates and ALWAYS read the fine print.
Avoid buying anything you don’t need: Don’t use these honeymoon offers as an excuse to buy things that you normally wouldn’t. Compile a list of everything you need from your colleague’s Kris Kringle to the Christmas pudding, check it twice and stick with it.
Create a budget: It’s important to have a solid plan for how you’re going to get your debt all cleared up before the interest free period expires. There are plenty of free online budgeting tools to help you work out how much you can afford to pay off each week.
Always pay more than the minimum: It’s a good idea to always pay more than the minimum requirement each month to steer yourself clear from those high reverts rates and say goodbye to the debt sooner rather than later.
Beware of cash advances: Avoid using your credit card to withdraw cash from an ATM if you can because you’ll be hit with a steep cash advance and could also be charged an upfront cash advance fee.

Do you have any other tips to add to this list? Please SHARE in the comments below.

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15 Comments

- - Melissa89 said
  - 26 Jul 2016
    8:26 pm
I never buy anything for christmas that I can’t afford at the time of purchase. It’s simply not worth it

- - mom94922 said
  - 23 Feb 2016
    9:02 am
Try shopping during the year when there are specials or sales on. I have found this saves heaps of money and also takes the stress out of shopping!

- - BellaB said
  - 29 Dec 2015
    12:15 pm
And always know the date interest free runs out, so you pay it off before then.

- - rachelvk said
  - 26 Dec 2015
    10:57 am
I personally don’t like the idea of credit purchases… if we can’t afford it we wait until we can.

- - mum888 said
  - 13 Dec 2015
    9:06 am
I remembered one time my brother used his credit card to go to a trip to Europe. Very silly as he ended up paying his holiday many years later . I think CC’s should only be used in an emergency and not for personal uses at all. Even though it is interest free now , after that certain time , your balance will increase fast if you don’t commit in making early payments. Xmas is time when it is tempting and you still have to be vigilant .
- mom94125 replied
  
  04 Jan 2016 , 4:33 pm
  yeah it is way to easy to lose track of spending on a credit card and you do still have to pay it back so i do tend to agree.
- - mom123456789 said
  - 10 Dec 2015
    9:35 pm
Think I’ll steer clear of credit purchases; I spend enough as it is haha

- - mom94125 said
  - 10 Dec 2015
    9:08 am
great tip in the comments about the banking direct debit. very smart to do! i like to space out buying pressies over a few months

- - mom74640 said
  - 08 Dec 2015
    10:25 am
Lke hf

- - mom93821 said
  - 08 Dec 2015
    6:37 am
Christmas should be nice and if you cannot afford it then do not buy it! Live within your means. No one will remember expensive gifts, but they will remember time spent together!

- - mom110297 said
  - 08 Dec 2015
    12:22 am
I am a big believer in ‘if you don’t have cash then you don’t need it’
Save your money and buy what u want without using credit and stay debt free!

- - mom90758 said
  - 07 Dec 2015
    6:11 pm
Great article! I personally don’t buy anything on credit. I just spend what I can afford. But Christmas can be a tricky time for a lot of people indeed.

- - mom165081 said
  - 07 Dec 2015
    11:39 am
We don’t buy anything this way – just too risky.

- - mom80542 said
  - 07 Dec 2015
    11:19 am
I work in banking & in particular worked in front line sales of said products for many years and concur with all the tips in this article. You need to be honest to yourself about what you can afford per month for the 6 months of interest free and be extremely disciplined to pay it off within that time period. Set up a direct debit via your internet banking to ensure you pay it off on time. If you are taking a cash advance at any time – the Interest rates for a CA as more often than not higher than purchase rates and ARE NOT included in the 55 days interest free type periods. You start being charged interest immediately & forego that interest free period until you payout the cash advance amount. Avoid it at all costs I say. To avoid this option all together do what I do and work out what you think you will spend on average at Xmas, open up a new savings account (one with no fees) and transfer funds into it weekly/fortnightly/monthly – whatever your pay cycles are. Again by setting up a direct debit – and that way you can buy at Xmas with your own money and have no burdens of debt to pay in the new year. Have a great Xmas everyone.
- mom93821 replied
  
  09 Dec 2015 , 5:56 am
  Thanks for sharing your ‘wealth’ of experience.