How do you pay for Christmas? Is it the naughty way or the nice way? Find out here!
The nice ways to pay for Christmas
0% purchase rate cards
0% purchase rate cards don’t charge interest on purchases for 6, 12 or even 15 months. Just be sure to check the revert rate and make sure you don’t succumb to the temptation to overspend just because you’re not paying any interest initially.
Pay in cash
Set a budget and only take the cash amount that you’ve budgeted for.
It’s much easier to track your spending and it could become a personal shopping challenge by tracking down the best price – in another store or online – and asking other retailers to match or better it.
Loan from family
Hitting up the bank or a payday lender might seem like your only option but a bit of careful negotiation could see you paying no interest on a small loan from a relative to cover the cost of Christmas activities or gifts. Just remember to be clear about the amount and repayment method and timings before you commit.
The naughty ways to pay for Christmas
These loans have build up a pretty nasty reputation – and for good reason.
With interest rates as high as 288%, which is 16 times higher than the average credit card rate, they’re really not designed to cover the cost of Christmas but rather for an emergency situation. Not to mention the fees associated with borrowing, these can be as much as $24 per $100 borrowed, so for a $500 loan you’d be paying a huge $120 just in fees.
Credit card cash advances
It may seem like a good idea at the time but withdrawing cash using your credit card, otherwise known as a cash advance, can attract interest rates which are much higher than your purchase rate. Plus, you’ll pay a fee on top of this and considering Aussies withdrew $843 million this way last Christmas, that is a lot of money down the drain.
Similarly, a bank overdraft is going to sting you with similar fees and high rates so avoid these too.
Retailers know we’re feeling stretched financially at Christmas so you might find yourself entranced by interest free periods, deferred payment plans or bonus rewards points for spending. Stop.
These offers are usually for such long periods that you forget the interest rate you’ll revert to when the honeymoon is over, or worse overspend in the honeymoon haze.
The David Jones Store Card for example, charges a 24.74% interest rate, which is higher than any credit card purchase rate in the Mozo database. The Myer Card interest rate is only slightly lower at 23.49%.
How do you pay for Christmas? SHARE with us in the comments below.