In the lead-up to Christmas, the Australian Securities and Investments Commission (ASIC) is warning people to manage their credit cards and budget carefully to avoid a painful financial hangover.
Australians owe more than $27.9 billion on credit cards alone - a reminder that credit cards are usually the most expensive way of borrowing money.
'Getting into debt is far easier than getting out of it. By planning your Christmas spending now, you can avoid piling up unmanageable credit card debts', ASIC's Executive Director of Consumer Protection and International Relations, Mr Greg Tanzer said.
'Credit card interest rates, which average about 16 per cent, can give you a nasty financial hangover. For every $1,000 you put on your credit card, you pay another $160 a year in interest. That's a very expensive way of doing the Christmas shopping.'
'If you can afford it, pay cash. Even now, there can still be time to save a bit extra to avoid borrowing more than you can afford. Using lay-by can help you avoid going into debt.'
'If you do need to use your credit card, see if you can start saving a bit extra now to clear your credit card debt as soon as possible. Then start putting some money aside for next Christmas', Mr Tanzer said.
'Also, consider other Christmas savings tips. For example, if you're buying a mobile phone for your children this Christmas, buy them a pre-paid card, and make them top it up if they spend too fast.'
Some simple tips for a financially happier Christmas:
- pay by cash or EPTPOS instead of using credit if you can afford it;
- pay credit cards off as fast as you can;
- use lay-by for Christmas shopping; and
- use pre-paid cards for your children's mobile phones and make them top up any overspending.
© Copyright ASIC, 22 November 2004. http://www.fido.asic.gov.au