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How to manage your Christmas credit card debt

Are you paying for Christmas on credit? Here’s how you can avoid a debt hangover this silly season.

Christmas can be an expensive time of year. Festive decorations, presents, Christmas party food and drinks all add up to make massive post-Christmas debts. Last year, Australians used their credit cards to spend an estimated $9.8 billion on Christmas gifts in December 2016. This leaves Aussies with an average credit card debt of $1,666 and a combined $397 million worth of interest costs to repay after Christmas.

Unfortunately, as your debt grows with interest, this means that the impact of your festive credit card spending will linger long after the Christmas decorations have been packed away.

Whether you want to keep your credit card spending in check over Christmas or find out how you can manage your post-holiday debt, you can use this guide to pick up some tips.

5 ways to avoid credit card debt over Christmas

Paying for Christmas gifts with your credit card can be a useful way to free up your cash flow this holiday season. However, planning ahead is crucial if you want to keep your credit card debt in control. Here are five ways you can manage your credit card debt this Christmas:

1. Get a 0% purchase credit card

The main reason you may fall into unmanageable debt over Christmas is if you can’t repay your balance and your debt grows with interest. If you need more breathing room to pay off your purchases, you can opt for a credit card with 0% on purchases for a promotional period. With promotional periods that can last from 3 to 12 months, you can repay your Christmas spending without any additional interest costs well into the new year. At the end of the promotional period, the standard interest rate applies so it’s best to clear your balance before this happens.

2. Pay your balance in full

If you can afford to do it, you should pay your balance in full before end of the statement period. Not only will you avoid interest, but it usually means you can also take advantage of interest-free days for future purchases. At the very least, you should always aim to pay more than the minimum repayment each statement period.

3. Budget for purchases

Setting and sticking to a budget can help keep your finances in check. Although it might be tempting to spend up to your credit limit, you should only spend what you can realistically afford to repay. A budget will help curb your temptation to spend and you can use your card mobile app to track your transaction history in real time. If you have reached or exceeded your budget for the statement period, leave your credit card at home so you’re not tempted to use it. You can use the finder budget planner to get started.

4. Create a payment plan

Almost as important as creating a budget is organising a payment plan. To stay on top of your credit card bill, it may be worth setting up automatic payments on your account. This will help you keep your balance and interest charges in check. Plus, automatic payments mean you won’t need to remember to make a payment during this busy time of year – it’ll just be done for you!

5. Use a mix of credit and savings

To balance your cash flow, you could also consider using a mix of credit card and savings to cover your Christmas costs. You could even set up a savings account specifically for the silly season.

Compare 0% purchase rate credit cards

Rates last updated May 25th, 2018
Name Product Purchase rate (p.a.) Interest Free Period Annual fee Balance transfer rate (p.a.) Product Description
Virgin Australia Velocity Flyer Card - 0% Interest Offer
0% p.a. for 14 months (reverts to 20.74% p.a.)
Up to 44 days on purchases
$129 p.a.
0% p.a. for 6 months
Buy now and pay later with 0% p.a. interest on purchases for 14 months. Plus, 0% p.a. on balance transfers for up to 6 months.
NAB Low Rate Platinum Card
0% p.a. for 9 months (reverts to 13.99% p.a.)
Up to 55 days on purchases
$100 p.a.
0% p.a. for 6 months with 2% balance transfer fee
Enjoy a 0% p.a. interest rate offer on purchases for 9 months and the protection of 7 complimentary insurances including overseas travel insurance.
NAB Low Rate Credit Card
0% p.a. for 6 months (reverts to 13.99% p.a.)
Up to 55 days on purchases
$59 p.a.
0% p.a. for 6 months with 2% balance transfer fee
Receive an introductory 0% p.a. interest rate for 6 months on purchases, Visa Entertainment offers and a competitive $59 ongoing annual fee.

Compare up to 4 providers

Christmas credit card options

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How to deal with post-Christmas debt

If you’ve already racked up Christmas credit card debt, it might be time to compare 0% balance transfer credit cards. You can use these cards to transfer your existing debt to a new card with 0% on balance transfers for a promotional period. The length of the offer will vary, but these can last for up to 24 months.

This means that you could have up to two years to repay your Christmas purchases without paying any interest. At the end of the promotional period, any remaining balances will collect a higher revert rate. While you’re only required to pay the minimum repayment each month, it’s wise to pay as much as you can each month to clear the entire debt before it collects interest. For example, if you have a Christmas credit card debt of $5,000 and a balance transfer with 0% for 18 months, you’d need to pay approximately $278 each month to clear the balance by the end of the promotional period.

You should calculate how much you’d need to pay each month to clear the balance in full before you apply for the card. This will help you determine which card is right for you and how long you’ll need to repay your debt.

If you have multiple credit card debts, you can also consolidate them into the one 0% balance transfer credit card depending on the amount and where you’re moving the debt from.

Compare 0% balance transfer credit cards

Rates last updated May 25th, 2018
$
% p.a.

Your search criteria didn't return any products. Click to reset your filter options and search again
Name Product Balance transfer rate (p.a.) Purchase rate (p.a.) Annual fee Amount Saved Product Description
Westpac Low Rate - Online Offer
0% p.a. for 26 months with 2% balance transfer fee
13.49% p.a.
$0 p.a. annual fee for the first year ($59 p.a. thereafter)
Take advantage of 0% p.a. for 26 months on balance transfers with a one-time 2% balance transfer fee and a $0 first year annual fee.
HSBC Platinum Credit Card
0% p.a. for 22 months with 2% balance transfer fee
19.99% p.a.
$0 p.a. annual fee for the first year ($129 p.a. thereafter)
Offers a 0% p.a. for 22 months balance transfer, $0 annual fee for the first year and an annual fee refund each year when you spend $6,000.
St.George Vertigo Platinum - Online Offer
0% p.a. for 24 months with 1% balance transfer fee
12.74% p.a.
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
Platinum card benefits including complimentary insurance, plus first year annual fee waiver and 0% p.a. for 24 months on balance transfers.
Virgin Australia Velocity Flyer Card - Bonus Points Offer
0% p.a. for 18 months
20.74% p.a.
$64 p.a. annual fee for the first year ($129 p.a. thereafter)
Earn up to 60,000 bonus Velocity Points in the first 3 months and enjoy a discounted annual fee of $64 for the first year.
HSBC Low Rate Credit Card
0% p.a. for 20 months with 2% balance transfer fee
13.25% p.a.
$79 p.a.
Receive up to 20 months interest-free on balance transfers with a 2% BT fee. Also enjoy exclusive offers with the home&Away Privilege Program.

Compare up to 4 providers

Don’t want another credit card? Consider a personal loan.

If you think you’ll need more than 24 months to repay your debt or if you don’t want another credit card, you could consider consolidating your Christmas credit card debt with a personal loan. While you’ll have to pay an interest rate, you can take advantage of repayment terms of one to seven years depending on the loan. These interest rates are usually lower than the standard revert rates you’ll get with a balance transfer, so you could still save on interest costs in the long run.

You can see our guide to using a personal loan to consolidate Christmas debt for more information.

The sooner you start thinking about Christmas credit repayments, the greater your chances are of keeping your debt to a minimum. Whether you are just starting your seasonal shopping or already dealing with post-holiday debt, now you have steps you need to manage Christmas debt in a way that works for you.

Pictures: Shutterstock

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Credit Card Offers

Important Information*
Westpac Low Rate - Online Offer
Westpac Low Rate - Online Offer

Interest rate

13.49

Annual fee

59
HSBC Platinum Credit Card
HSBC Platinum Credit Card

Interest rate

19.99

Annual fee

129
NAB Low Fee Card
NAB Low Fee Card

Interest rate

19.74

Annual fee

30
Citi Platinum Credit Card - 100k Bonus Points
Citi Platinum Credit Card - 100k Bonus Points

Interest rate

20.99

Annual fee

149

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