Danger zone for debt

The Christmas frenzy is starting so it’s time to pay attention to your credit card,

CONSUMERS’ frantic rush to Christmas is the most dangerous time of year for credit card customers to rack up debts that leave them with a financial hangover.

Last December, shoppers were left with a whopping $52.9 billion owing in card debt, and $31.7 billion accruing interest.

Credit card interest rates often cause users serious pain well after they’ve made a purchase, with some cards attracting interest rates as high as 24.99 per cent.

New data from financial comparison website Finder.com.au shows there is plenty of choice for customers, with more than 300 cards on offer.

But people must pick a card carefully because some annual fees are as high as $1450 per year, while others have no fee.

Finder.com.au spokeswoman Bessie Hassan warned credit card customers to be wary of lenders spruiking cards in the lead-up to Christmas.

“Credit card providers are known to ramp up their offers to entice new customers – these can range from zero per cent purchase cards, balancetransfer cards, cashback offers and even frequent flyer programs,” she said.

“Zero per cent purchase cards are a popular option at this time of year; the beauty of these is that you can spend money on the card with no interest payable for the entire promotional period, currently up to 14 months.”

But borrowers should understand that promotional periods don’t last forever and the revert rates – once this period ends – can be above 20 per cent. Instead, maximising interest-free days on a card could be a way to spread out your festive spending pain.

Lender Skye Mastercard

offers card customers 90 days interest free for every card purchase made from the date of purchase. This is the longest leeway time given to any card provider for everyday purchases.

Skye senior product manager Blake Henry urged consumers “to set a budget and a plan on how to pay back your credit card debt, particularly within the interest-free period”.

James Street Financial director James Trethewie warned shoppers to resist racking up credit card debt, which often resulted in a debt hangover in the new year.

“Before you go nuts, work out your financial position,” he said. “It’s much better to pay with cash than credit. But make sure you write down when things are due because the day you go over the due date you will be stung with interest.”