Budget for Christmas now so it’s not sink or swim in the New Year
Wesley Mission has issued a telling warning to consumers who are intent on maximising their credit card expenditure before Christmas with the hope of transferring their balances to a no interest card in the New Year.
From 1 January 2019, new credit limits will be based on what a person can afford to pay over a three year period. The new regulation, announced by ASIC in September aims to help reduce debt traps when consumers apply for a new credit card or credit limit increase.
Customers can still choose how much they repay but the new credit card limit assessment is only based on what someone can afford to pay off over three years. It doesn’t mean they have to pay that amount each month.
Many zero per cent per annum balance transfer credit cards include a maximum transfer amount that is based on a person’s credit card limit. For example, someone may be able to move debt worth up to 80 per cent the available credit limit on the new card. When the three-year assessment comes into effect, it could be harder to get a credit limit that allows you to balance transfer your entire debt.
For example if a customer had a $5,000 debt and wanted to move it to a new card but was only offered a $4,000 credit limit, they could end up carrying a balance on both the old and the new card.
The changes underline the importance of budgeting for Christmas so that consumers do not face the harsh choice of ‘sink or swim’ come January.
By using Wesley Mission’s on-line budget and financial fact sheets, and links to a budget planner, consumers will be able to spend wisely this Christmas for family gifts, decorations, food, travel and Christmas cards.
“Too often people approach Christmas with a live now, pay later mentality,” the CEO of Wesley Mission, the Rev Dr Keith Garner said.
“We’re urged to open our wallets at Christmas but we shut our minds to the implications of over-generous spending.
“People should stick to what they can afford. Unfortunately the cost of Christmas has been measured. It is essential that people know how much Christmas will realistically cost and stick to buying only what they can afford.”
Other steps recommended by Wesley Mission to ensure people have a great Christmas include:
- Using credit cards as little as possible and minimising the associated costs;
- Asking the credit card provider to lower your limit in order to prevent you from exceeding a comfortable amount;
- Encouraging relatives and friends to pitch in at social functions and each bring a dish.
“For families with large families to cater for, we also recommend the tradition of Kris Kringle,” Dr Garner said. “This is where people put names into a hat and then each draws one out. You only buy a present, at an agreed value, for whoever’s name you draw.”
“This spreads out the cost so that no-one person is over-burdened.”
The tips from Wesley Mission come as it is gearing up for one of its busiest periods during the year.
Dr Garner said nearly all Wesley Mission’s services would be “stretched to the limit”. He said pressures – emotional, mental physical and financial – were often “exacerbated” during the Christmas/New Year period.
If your situation is more urgent, you can also get immediate help by calling Lifeline on 13 11 14.
People can phone Wesley Mission Financial Counselling Service on 1300 827 638.
Alternatively, the Credit and Debt Hotline is a toll-free telephone counselling referral and support service. They have extensive information on available resources, including referrals and face-to-face financial counselling services.
Phone 1800 007 007 Monday–Friday 9.30 am to 4.30 pm