How to manage Christmas debt in 2020
Don't let 12 days of Christmas spending turn into a 12-month debt hangover
If you want to kickstart the new year by getting your credit card debt under control, use this guide to compare options including balance transfer credit cards and debt consolidation personal learns, plus pick up some tips to avoid Christmas debt next year.
Use a 0% balance transfer credit card to repay with no interest
You can transfer debt from your existing card to a new card that charges no interest on balance transfer credit cards for a promotional period. Not only will you save money, but you may be able to pay off your debt faster without the burden of interest. The interest-free periods can range from 12 months up to 26 months, meaning you could have more than two years to repay your debt without any interest charges.
If you have more than one credit card, you can also consolidate multiple debts under one new account with a balance transfer. That way you only have to manage one account and all of your debts will attract no interest for the promotional period.
It's important to pay off your debt in full before the end of the promotional period, as any remaining debt will attract the much higher revert interest rate. You can learn more about how these cards can be used to consolidate and repay debt in our guide to balance transfer credit cards.
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Repay your credit card debt with a personal loan
If your credit card debt is high, you might want to transfer it and pay it off with a personal loan. Some balance transfer credit cards only accept transfers that are up to 70% or 90% of your approved credit limit, so you might have better luck transferring it to a personal loan.
Personal loans don't offer 0% promotional offers but the interest rates may be lower than what you're currently paying with your credit card. The loan terms are also usually much longer than balance transfer promotional periods. Application and monthly fees apply and it's important to check what you'll be charged if you can't make repayments on time before applying.
You can learn more about these loans in our guide to personal loans for debt consolidation.
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How to avoid credit card debt next Christmas
Now that you know how to get your Christmas credit card debt under control, here are some tips to keep your spending in check next year.
Use a 0% purchase credit card
If you still want to use a credit card over Christmas, you could save with a card that charges 0% on purchases for a promotional period. These cards can charge no interest on purchases for a promotional period that usually ranges between 6 months and 14 months.
As long as you pay off your card in full before the interest-free period ends, these cards can be a useful way to get some breathing room to pay off your Christmas spending without additional interest costs. Any remaining purchases will attract the standard interest rate after the promotional period ends, so it's important to pay off your balance in full before interest applies.
Stick to a budget and take advantage of sales
It's important to create a budget and stick to it ahead of Christmas. You should aim to pay off your balance in full each statement period to avoid attract interest, so only spend as much as you know you can afford to repay.
If you're taking advantage of a 0% purchase offer, create a budget based on what you know you can repay before the interest-free period ends. For example, if the card offers 0% on purchases for 12 months and you plan to spend $2,000 on Christmas, you'll need to pay around $167 each month to pay off the balance in full before interest applies.
You can also take advantage of sales, such as Click Frenzy, Black Friday and Cyber Monday, to buy gifts in the lead up to Christmas. Not only will you save with discounted prices, but you'll tick off the Christmas shopping list early.
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Credit cards can be a useful way to free up your cash flow at Christmas time. However, it's important to stick to a budget, repay your purchases and understand the debt consolidation options that are available if you want to get your debt under control once the Christmas decorations are packed away.
If you're looking for a new credit card to do your holiday shopping while keeping your costs under control, check out our guide to credit cards for Christmas on Finder.
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* The credit card offers compared on this page are chosen from a range of credit cards finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.