Press Release - Resist the Urge to Splurge this Season
by Lisa Montgomery 14/11/2007
With the approach of Christmas, the lure of Boxing Day sales, and the prospect of another interest rate rise, leading non-bank lender Resi Mortgage Corporation says households should resist the urge to (over) splurge on credit cards this festive season.
Resi’s Head of Consumer Advocacy, Lisa Montgomery, says in the current economic climate families need to give serious consideration to their current financial commitments, before splashing out on lavish Christmas gifts and post Christmas sales.
“Christmas is a time of celebration, but it can also be a difficult time for many families, trying to juggle the competing financial demands of buying gifts and managing credit card and mortgage repayments,” says Ms Montgomery.
“It’s not uncommon for credit cards to get a real workout during this time of the year, and credit card debt can easily spiral out of control if not kept under check.”
The Reserve Bank of Australia’s statistics show credit card debt in Australia now sits at a staggering $41 billion (as at August 2007).*
“This year, I would urge people to take responsibility for their finances and resist overspending on impulse presents or goods that will inevitably place increased pressure on household budgets,” Montgomery says.
“What people need to remember is that credit cards are the most expensive way to borrow money, with interest rates often double that of a home loan.”
Montgomery suggests before being swept up by Christmas and the subsequent “sale mania”, people should:
- set a budget on how much they can realistically afford to spend, and stick to it;
- determine before making any purchase, if the item something they need, or something they want;
- Consider introducing a Kris Kringle style Christmas. The emphasis is then on spending time together, rather than simply spending money;
- Reduce the Christmas food and drink bill by planning ahead, buying in bulk or asking people to bring a ‘plate’;
- If you receive your annual bonus at Christmas – rather than blowing it, use it to pay something off;
- avoid the pitfalls of using multiple credit cards, including retailer’s credit cards, in order to ‘spread the debt’, and;
- ensure they always have enough money to meet their regular financial obligations including their mortgage repayments and other household utilities.
“If you do decide to ‘bag a bargain’ at the sales, try to pay off your credit card as soon as possible to avoid high interest rates,” says Montgomery.
“By paying on time you can also avoid hefty late fees and charges, which can erode any savings you made on your original purchase.”
Montgomery says people who get into financial trouble servicing their credit card debt should contact their credit card provider to organise a repayment scheme.
Another option is to consolidate the high interest rate credit card debt into one lower rate debt through a home loan.
Montgomery suggests those people who can insulate themselves from the magnetism of the sale hype would do better to put any spare money into their mortgage, and suggests this would also be a good place to deposit any tax return dollars.
“With both the Government and Opposition promising tax cuts, I would advise all families to look at paying off their mortgage – then you’ll be able to have your “Christmas” cake and eat it too!”
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