This lag can leave you far behind

I DO love a catchy new phrase, and this one made me laugh. “Debt lag” is a new one for me.

It seems that as Chrissy approaches we plan a holiday, but don’t quite get around to saving for it. So two million of us turn to our credit cards, and cop a nasty case of debt lag!

Among the holiday-makers who return home with a maxed out credit card, half clear the slate within three months. But the remainder can take anywhere from six months to more than a year.

Taking a credit card on vacation can make a lot of sense. It’s a lot more secure than carrying wads of foreign currency, and it provides a handy backup if you run low on the folding stuff.

Vacations tend to encourage a sense of bonhomie, which can see us splurge on things we wouldn’t even think about buying at home.

There’s no problem with a bit of overspending — if you can afford it. After all, holidays are meant to be enjoyed.

But Australians rack up an average of $2000 on their credit cards while on vacation, and unless you can pay off the balance immediately the interest charges won’t just take the shine of a trip’s happy memories, they could leave you cashstrapped well into 2018.

The key to avoid blowing your vacation budget is to plan how much you’ll spend and how you’ll pay for it. Most holiday-makers set a travel budget but only about half stick to it.

Where possible, aim to book and pay for accommodation, tours and even entry to attractions before you leave home so you’re not facing inflated tourist prices.

Surprisingly, the most cited ripoffs mentioned by Australian travellers are credit card and ATM fees plus mobile phone roaming charges. Yet these are easy to control.

Read the fine print of your credit card and/or travel card to understand any fees you may be slugged with.

For phones, either purchase an add-on pack with your local telco — it’s likely to be far less costly than pay-as-you-go roaming — or ditch your local SIM. Picking up a prepaid SIM at your destination is a lowcost way to stay connected.

Paul Clitheroe is a founding director of financial planning firm ipac, chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine