Money Hack: Put your Christmas gifts on plastic and pay no interest
Pay off your Christmas purchases with no interest until 2019.
In 2016, the average Australian credit card holder had a debt of $1,666 after Christmas. And according to recent research by finder, 1 in 5 Australians plan to use their credit card as the primary source of funding over the Christmas period. While this can help free up your cash flow, it also means that plenty of Aussies are opening themselves up to debt well after the holiday decorations are packed away.
However, you can reduce your risk of falling into debt this year by setting yourself a budget and using the right credit card.
If you use a credit card with 0% on purchases, you can repay your credit card debt without paying any interest for a promotional period. The introductory period can range from 3 months to 14 months, meaning you could pay off your Christmas gifts without forking out any extra costs for interest well into the New Year and beyond.
Generally, the longer the promotional offer, the more interest you could save. You can use the comparison table in our guide to 0% purchase credit cards to enter in how much you plan to spend over Christmas and see how much interest you could save with the different offers.
The right 0% purchase credit card for you will also depend on your budget and your ability to repay. For example, let’s say you’re spending $5,000 on your credit card over Christmas. If you had a card with 0% on purchases for 12 months, you’d have to pay around $417 each month to clear the entire debt before the offer ended and the standard purchase rate applied.
If you don’t think you could afford this, you may want to look for a card with a longer promotional period to spread out the repayments. This is why it’s so important to set yourself a budget and plan ahead when comparing your interest-free options.
As well as the length of the promotional offer and the revert interest rate, you should also consider the annual fee. While some 0% purchase cards offer $0 annual fee for the first year, others have annual fees in the tens or hundreds of dollars. To justify applying for the card, make sure that the interest saved outweighs the cost of the annual fee.
If you’re one of the 20% of Aussies planning to pay on plastic this Christmas, now you know how you can use a 0% purchase credit card to manage your holiday costs without racking up debt.
Finder Money Hacks is a bi-weekly round-up of the latest tips and tricks to help you improve your finances. Check back every Wednesday and Saturday for new hacks.