Santa and credit cards in red

Kiwis are more likely to let their credit card payments slip in the first three months of the year leaving them exposed to higher interest costs and a bad credit score.

Research by Credit Simple has found between January and March 7.6 per cent of accounts are past due compared to 6.4 per cent annually.

While the percentage may seem low, Reserve Bank figures show credit card balances typically peak in January after the post Christmas spendup.

Last January Kiwis had $6.28 billion on their personal credit cards — the highest monthly outstanding balance for the whole of 2016.

Total credit card spending on both personal and business cards peaked at $6.7 bin November. December figures are due out later this month.

Credit Simple chief executive David Scognamiglio said New Zealanders sometimes missed payments or paid bills late as they began to feel the effects of a Christmas debt hangover.

“The jump from 6.4 to 7.6 per cent in overdue credit card repayments might not sound big, but in a nation with $6.6 billion outstanding on credit cards, that little extra interest-incurring period adds up to millions in extra interest payments for consumers.”

It can also damage a person’s credit score putting them at risk of not being able to borrow in the future or having to pay a higher interest rate.

“Late or missed payments on any borrowed funds will damage your credit score and could prevent you from getting credit again, so it’s crucial to make a plan to pay back and credit consistently and on time to keep your credit score healthy.”

Kiwis pay interest on about 63 per cent of the outstanding credit card debt and the average interest rate on outstanding balances was 18 per cent last year.

Financial rating firm Canstar estimates Kiwis put around $36b on the plastic last year of which $22.9b would attract interest, equating to more than $4b in interest payments.

Canstar general manager Jose George said it was important for consumers to make the right decisions about which credit cards they use. “Credit card interest rates currently range from 12.69 per cent to 25.99 per cent. Choose the wrong card and it could have a massive impact on how you can manage your daily finances.”

George said consumers needed to consider what kind of user they were when choosing a card.

Those who make a part payment or make the minimum balance payment should focus on low-interestrate credit cards, while those who use their credit card for emergencies should look at low or no-fee cards.

People who pay off their credit card in full should also look at how much they are paying in annual fees and can take rewards into account.