In the months after Christmas, Consumer Action Law Centre’s financial counsellors hear from hundreds of callers struggling with Christmas debt. Their credit card bills have arrived and the cost of presents and festivities, combined with ‘back to school’ costs, often proves too much. Consumer Action’s team can give practical advice to help these callers get back on track. But the best advice they can offer is a word of warning in the lead up to Christmas – plan ahead.
So here is some helpful advice from CALC’s financial counselling team to help Australians deal with the holiday season.
- It pays to keep one eye on the big picture, and that means your job. Remember that work can dry up in many industries over the Christmas period so, if you’re in casual employment, make a realistic assessment of your likely income for the Christmas period.
- Decide how much you can afford to spend and who you’re going to buy presents for before you begin shopping. It will take discipline to stick to your budget, but you’ll thank yourself later on.
- Look for alternatives to credit cards. Using lay-by programs can be far cheaper and involves less risk.
- If you are going to buy on credit you should give some early thought to how and when you’re going to be able to pay it off. Having a basic plan of attack will help when the bills start arriving.
- Consider alternatives to the expense of bought gifts. You can gift your time by printing off certificates for things like babysitting and dog walking. If you can cook or make things, why not bake some delicious cakes or biscuits, or make some soap, to give to friends and family? People love to receive a truly personal gift.
Avoid common pitfalls
- In the lead up to Christmas, credit card companies may start to advertise cards with very low interest rates, but remember, these low rates are usually short lived and interest rates commonly revert back to typically expensive rates.
- Be wary of stores offering interest-free periods. Make sure you ask for the details because it may only be interest free if you’re able to pay it off on time.
- Avoid taking out short term loans to pay for presents or bills over the holiday season. These loans, often called payday loans, are extremely expensive and it can be very hard to pay them off in a short amount of time.
- Do NOT hire goods from furniture rental companies and then give them as gifts. These deals come with huge price tags, restrictive contract terms, and you may not own the product at the end of the lease period.
Facing the New Year
- If you’ve put items on credit cards, try your hardest to pay off more than the minimum repayment. Credit card interest is compounding, meaning you pay interest on the interest, so you’ll be much better if you can pay it down as soon as possible.
- As soon as you feel you’re falling behind, or are struggling to pay your bills, get on the front foot and seek help. Contact your utility or credit provider and ask for hardship assistance. They may be able to offer assistance such as payment plans or extra time to pay your bills. Professional advice from a free & independent financial counsellor could also be the ticket to get your finances back in order. You can call a financial counsellor on 1800 007 007 from anywhere in Australia.
- Many families find that their Christmas debt is compounded by ‘back to school’ costs early in the New Year. Remember that you can often get assistance with school costs.