Shoppers have plenty of choice when it comes to choosing how to pay for Christmas
Christmas is fast approaching and many people still have lots of expensive items to pay for, and experts say there are manageable ways to do it. SEE THEIR TIPS
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Spending up big on Christmas expenses can easily leave a hole in your pocket, especially with so many different payment options available.
There’s just over three weeks to go until Christmas Day, which will no doubt result in many Australians making a mad dash in the final weeks to fill their festive stockings.
The latest independent research conducted on behalf of the Australian Retail Credit Association’s CreditSmart found more than 40 per cent of Australians would rely on credit to get them through Christmas.
And, worryingly, 4 per cent of people are still paying off their debts from last Christmas.
The Australian Retailers Association’s executive director, Russell Zimmerman, urged shoppers “to spend within your means”.
“Don’t spend what you haven’t got,” he said.
“Something might be really good value but if you can’t afford it and have to go into debt for it, think twice.”
So let’s take a look at all the different ways you can pay for your Christmas expenses this year, to help you decide the best option for you.
1. CASH
Nothing beats paying with cold hard cash.
This means you are using your own money and not turning to credit.
When you spend cash you feel it more as the notes fly out of your wallet, as opposed to tapping your card into oblivion.
2. CREDIT CARDS
This can be one of the most expensive ways to pay for Christmas, particularly for shoppers who don’t pay off their card in full each month.
CreditSmart’s research showed 40 per cent of people ranked credit cards as the number one form of payment they would use this Christmas.
Financial adviser Scott Haywood said using plastic could be useful if customers maximised the interest-free periods.
“The interest rates are obscene and this is a time of overindulgence, and retailers are relying on people to be impulsive and buy things they didn’t budget for,” he said.
The latest Reserve Bank of Australia figures show in September credit card customers owed $49.7 billion on plastic and $29.3 billion was accruing interest.
This is the lowest amount of credit card debt owing in five years, but credit card interest rates are up to 24.99 per cent.
3. CHRISTMAS CLUB ACCOUNTS
These were big back in the day, allowing savers to regularly tuck away money and then access it from November onwards.
People tempted to dip in early would be penalised with a hefty fee.
While these accounts attract next to no interest, they are a brilliant way to reduce the financial pain at Christmas time.
But for many people it will be too late to start up a savings bucket for this year, so it’s best to start one now for the following Christmas.
4. BUY NOW, PAY LATER SCHEMES
New statistics from DBM Consultants show 1 in 10 Australians regularly use BNPL schemes.
And one in five 18 to 29-year-olds use the services such as Afterpay, Zippay, Humm and Openpay regularly – an increase of 15 per cent from last year.
A newbie to this space is LatitudePay, which allows customers to buy goods and pay them off in 10 weekly instalments.
On these schemes customers are not charged interest, but they are hit with fees if they don’t meet the strict repayment criteria.
Latitude Financial’s chief customer officer, Greg White, said the payment options launched only a few months ago to “help shoppers fund their purchases sooner over 10 interest-free payments”.
“This payment flexibility is especially important over the Christmas holiday period, which can be an expensive time of the year for households and families,” he said.
Customers using LatitudePay must have a credit check beforehand, but not all schemes do this.
While it can be a useful and fee-free way to pay off goods, it could end up being expensive if you fail to pay the goods off by the set due dates.
5. STORE FINANCE
For big-ticket items such as furniture and home appliances – some of which may end up being a Christmas present for yourself – there is usually the option to use store finance.
This is when stores usually offer customers who have a specific credit card, store finance. Popular cards including GO Mastercard or Gem Visa cards.
Some of these deals allow customers to get up to 60 months interest free on items, but be
mindful - they usually have significant annual fees attached.
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If the customer fails to pay it off in full within the strict interest-free period, hefty charges apply. Often interest rates are more than 20 per cent.
Mr Zimmerman said store finance was a good option “provided you know you have to hit every milestone”.
6. LAY-BY
This good old-fashioned method of payment is still around.
Mr Zimmerman said “lots of retailers, particularly smaller stores, offer lay-by”.
Stores usually require customers to spend a minimum amount using lay-by and pay a small non-refundable fee of a few dollars to set up the purchase.
The idea is you order the goods and go instore to pay them off in bite-sized chunks.
With only just over three weeks to go until Christmas this method might be a little too late.