With the traditional end-of-year holiday season comes the temptation to splurge on gifts and holidays, but consumers are urged to know their limits before reaching for their credit cards, said Federal Member for Chifley, Ed Husic.
A recent Essential Research poll showed that 39 per cent of people surveyed said they would be putting at least half of their Christmas spending on their credit card, despite almost one-third also being concerned about the size of their credit card debt.
“Overdoing it on your credit card this Christmas could leave you with a debt that lasts for decades,” said Mr Husic.
“When people buy a house, they understand that they are making a financial commitment that could take them 30 years to pay off. Few people realise that their credit card could take them just as long.
“For example, if you have a credit card balance of $3,500 and an interest rate of 18.5 per cent, you would be required to make a minimum repayment of $70 a month.
“If you only make the minimum repayment in this example, it would take almost 44 years to pay the entire debt.
“However, if you increased your repayment to $100 a month, you would pay off your credit card in just over 4 years, a saving of almost 40 years and more than $9,000 in interest.
“While credit cards are often an easy and convenient way of making a purchase, make sure you know your limits before you reach for the plastic.
“Using the online credit card calculator at MoneySmart.gov.au, you can work out how long it would take you to pay off your credit card bill.
“Just making the minimum repayment on your credit card could mean that you spend several decades paying it off.
“But by increasing your repayment even by a small amount, you can shave years off the time it would take to pay that debt back.”
To use the credit card calculator and a suite of other online tools and resources, go to MoneySmart.gov.au You can also download smart phone apps by searching for ‘MoneySmart’ in the Apple iTunes App store or the Android Market on your mobile device, as well as follow MoneySmart on Facebook and Twitter.