Beat debt during the silly season
5 November 2007
With Christmas fast approaching and interest rates predicted to rise again, CUA (Credit Union Australia) has warned consumers to beware of spending beyond their means during the festive season.
CUA Managing Director Mr Graham Olrich said it was important for people to budget how much they could afford to spend rather than racking up large credit card bills they would have to pay off in the New Year.
“People need to be careful they don’t become overwhelmed by the Christmas and New Year sales, stay aware of their spending patterns and take steps to manage them better,” he said.
“Credit cards, if used carefully, are a convenient and economical source of funds, but only if you can pay off your debts in full each month. Otherwise, interest begins to accumulate and if the debt is left unmanaged people begin to experience serious financial problems.”
Excluding interest, credit cards cost Australian households $1 billion in fees last year and the average debt per card was $3,000.
Mr Olrich said there were some simple tactics people could employ to help them spend more wisely during the ‘silly season’.
“Start with devising a budget to see what funds are available for shopping,” he said.
“Secondly, make a list of what you want to buy. People are less likely to impulse buy if they have written on paper what they want to purchase before they shop.
“Shop around for the best price – don’t just accept the first price you find and try to work out a budget, even for gift shopping.
“Use credit card interest free periods properly and most importantly, don’t get carried away with impulse buying. Be realistic about what you can afford to pay back.
“Most credit card interest rates are manageable especially when coupled with interest free periods – make use of these.”
Mr Olrich said it was wise to have a strategy for managing debt before hitting the shops at Christmas time.
“If you know you are susceptible to excess credit card spending then a smart thing to do is lower the limit on your credit card. This might seem drastic but will definitely limit your spending.
“The next action is to clear any existing credit debt before you start spending over Christmas but the best alternative is avoiding the credit card altogether by setting up a Christmas savings account to prepare for the festive season.
“It may be too late to start this year but it is certainly something to think about for next year.
“It would be great to see people start off the New Year in control of their finances instead of in financial hardship due to their excessive spending throughout the silly season.
“Any financial institution can help you design plans for managing debt more effectively and this is certainly a smart step to take in the lead up to Christmas.”
