Take back control of credit

If your Christmas credit bills are causing a headache, here’s how to get on top, writes

THE post-Christmas spending spree is about to hit hard for many shoppers whose credit card statements are arriving in their inbox or mailbox.

Many of us have given our little piece of plastic its biggest workout of the year and it’s not until weeks or months later that the full impact is felt when trying to pay back thousands of dollars owing.

We’ve asked the experts how you should scrutinise your bill to help you save.

CLOSING BALANCE

This is that big fat figure on your statement that must be paid off in full to escape any interest charges.

Even if you leave a small amount to be paid back by the due date, any amount still owing means you will be charged interest on the full balance owing, not just the portion that hasn’t been paid off.

MINIMUM REPAYMENT This is that ridiculously small amount – usually just 2 per cent of the total amount owing – that is required to be paid back.

Financial comparison website RateCity’s spokeswoman Sally Tindall’s advice is to “ignore this”.

“It’s usually the one detail that is in bold on the statement and that’s the last thing you need to be looking at, the closing balance is far more important,’’ she said.

And the reason this figure is so minimal is so financial institutions can make a fortune from you in interest charges.

They hope you will let that debt continue to roll over and attract hefty interest charges that make them fat profits.

INTEREST RATE

RateCity’s database shows the average credit card interest rate is 16.91 per cent but card rates can go as high as 24.99 per cent. CUA’s head of member services Amanda Muir said the card statement will show details of the charges that apply if you continue to pay back the minimum amount at the applicable interest rate.

“It will say how long it will take you to pay off the card and how much extra you are likely to be charged because you are only paying the minimum,’’ she said.

TERMS AND CONDITIONS It’s certainly no fun but it pays to always read the terms and conditions of a card deal, Ms Muir said.

“It’s incredibly important because there are some providers that when you are looking at your closing balance you need to pay that in full for two consecutive months to retain your 55-day interest free period,’’ she said. “We don’t really read through terms and conditions and it’s so important to do that.”

BILLING CYCLE

Some cards offer up to 62 days interest-free on cards but it pays to know your billing cycle because this determines how many interest-free days you have.

You should also understand the due date of your bill and the fact that you have “up to” a number of interest-free days which only begins from day one of your billing cycle and not the day the purchase is made.

TRANSACTION HISTORY Make sure you go through your statement’s debits and credits with a fine toothed comb to identify any payments or charges that are incorrect or fees that you may not know about.

If there are, be sure to contact your financial institution and notify them.