With Christmas fast approaching, we thought we’d have a look at practical ways to improve your finances. With Christmas, the urge to spend is pretty strong so we want to help ensure you don’t go overboard and face a huge credit card bill.

Over a recent Christmas, New Zealanders bought goods and services worth over $20 billion on their credit cards and paid a mind-boggling $540 million of interest at an average interest rate of around 18%. The only people who benefit from this type of activity are the banks and the credit card companies. So how can you reduce (and ideally eliminate) your credit card bill?

1. Don’t let your bank continue to extend your limit. Keep your limit at a reasonable level.

2. Don’t be seduced by reward points programmes and Fly Buys. They usually only account for 1% to 2% of the value of purchases and are largely a marketing ploy to make you spend more.

3. Pay off your credit card in full every month. It’s quite simple – if you don’t pay it off, your debt will increase exponentially.

If you have money in savings, use it to pay the outstanding balance on your credit card because it is extremely unlikely the return on your investments will be higher than the interest you are paying on your credit card.

5. Have a budget and keep to it. Budget extra for things like Christmas.

6. Have one credit card only.

7. Remember your debt is your responsibility. Don’t try and hide from it, it won’t go away.

8. Use your credit card only when you have to such as booking airline tickets, making internet purchases, etc.

9. Know what interest rate you are being charged and read the fine print of your contract. In many cases, you may be charged interest when you don’t think you are.

10. Check your statements. You may be overcharged without knowing it.

11. All cards are not created equal so shop around for the best deals. Have a look at
www.cardwatch.co.nz, which provides a comparison of the credit cards available in NZ.

12. If all else fails try freezing your credit card in a block of ice! When you feel the urge to spend, you will have to wait for it to thaw. Better still, cut it up!

If you do have regular credit card debt, see how many of these tips you can use to bring your debt under control. It’s easier said than done, so if you need more help, just give us a call – that’s what we are here for.

– Colin Austin, CFP. Brought to you by Baptist Savings (BSDS) – established in 1962 by a group of Baptist pastors and businessmen to provide low cost finance to Baptist causes throughout New Zealand. Colin is a financial planner who is passionate about creating and protecting wealth for his clients. He established an independent financial planning firm in 2001 and is now a director of DecisionMakers (Auckland) Limited.