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.
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.
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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