Christmas shopping on credit can cost dearly
Are you planning on shopping Christmas gifts with credit cards this year? In that case, both the Consumer Council and Finance Norway advise to plan the purchases carefully and be aware that you use other people’s funds.
According to statistics from BankAxept and Nets, we traded for more than NOK 23 billion between December 1st and December 12th, split into 68.5 million separate transactions. At the same time, about half of Norwegians who celebrate Christmas are planning to do away with Christmas shopping entirely or partially by credit card, according to a survey YouGov has performed on behalf of Danske Bank.
– The figures showing that over a quarter are planning to fund Christmas with credit cards are simply scary. If you have a reasonable plan for repayment before the sky-high credit card rates start to run, that’s fine. If not, it can quickly become a boring start to the new year with expensive credit card debt hanging over your head as you move far into 2019, says consumer economist Anne Motzfeldt in Danske Bank to Dinero.no.
Half of the respondents state that they do not use a credit card at all during Christmas. One-fourth trade using credit cards to a large or some degree, and a further one-fourth uses a credit card “neither often nor to some degree” or “very little”.
With 60 and 22 per cent, respectively, there are Christmas gifts and then food and drink that make up the largest expenses in the Christmas preparations. At the same time, the survey shows that around half of respondents have never been worried about the economy in the post-Christmas period, while nine per cent say this has happened up to several times.
Don’t use the money you don’t possess
Therefore, you should use credit cards when buying Christmas gifts this year. The benefits associated with the use of credit cards are many, but the common plea among the experts is to be aware of the fact that it is not one’s own money.
– A bit of good advice is not to shop with money that you either do not have now or do not know with a hundred per cent certainty that you will have when the invoice comes, says Consumer Policy Director in Finance Norway, Gry Nergård, to Dinero.no.
If you plan to go shopping using credit cards, she advises you to investigate the interest rate that you pay if you do not pay at maturity and be aware that offers such as “deferred payment” can be a costly affair if you do not settle.
– If you buy on credit, then you use the money belonging to others. It is much more expensive than if you use your own money. If you buy on credit then you accrue debt, says Finance Director in the Consumer Council, Jorge B. Jensen, to Dinero.no.
The reason is as simple as running interest on what you do not repay after the interest-free period has expired. This is typically 45 days, after which the effective interest rate kicks in and this is usually between 20 and 30 per cent.
At the same time, the previously referenced survey shows that as much as 63 per cent of those who use credit cards pay back the outstanding amount at maturity. Furthermore, 22 per cent pay as much as they can, while 7 per cent only pays the required minimum amount per month. Another 7 per cent state that they pay a little whenever they can.
Credit cards can have several benefits
As long as you pay the outstanding amount at maturity, you completely avoid having to pay interest on any of the credit you use. In these cases, credit cards are virtually free of charge while offering significant benefits.
– If you shop online or abroad it will be appropriate to trade with credit cards, says Jensen.
The debt must be repaid
If you are among those who are immersing themselves in debt during this year’s Christmas shopping and end up spending more than you can repay, it is an unequivocal message for you from both Finance Norway and the Consumer Council: The debt must be repaid.
– There is no easy way out of debt problems. Debt must be repaid, and the creditor protection in Norway is high compared to other countries. There is, therefore, no escape, Jensen in the Consumer Council states.
– Firstly, you must apply the brakes with regard to purchases. Then you must prioritise which bills to pay first and last. You may want to get help to prioritise from someone who knows how. Ask if your bank can help you with this, Nergård joins in.
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