The Christmas countdown has started in earnest, and research has shown that some of us use our credit cards as a “buy now pay later” option to fund our festive season spending.

According to one industry report, I read recently, Aussies borrowed a combined $29 billion on credit cards in December 2017. This aggregate figure is the equivalent of $1,727 in purchases per card. Moreover, this spending is up from the $1,666 the average cardholder owed after the Christmas period in 2017.

I’ll happily confess Christmas shopping doesn't do much for me. However, there's plenty to be said for being aware of some of the spending traps - especially if you wish to avoid the New Year financial hangover created by an overworked credit card.

Santa will tell you cash is king

Be aware that any offer of an interest-free period with a credit card won’t buy you a cheaper flat screen television or surfboard. Typically, the cost of goods is customarily inflated to cover the expense of the interest-free period. Often if you pay cash, the products can be as much as 10% cheaper than the advertised rate.

Avoid payday lenders like the plague. These short-term money lenders do not tell you what the real interest rate is because they don’t have to include this impost in the application fees. Sometimes once the upfront fees and included, by using a payday lender, you could be paying as much as 30% p.a. for your Yuletide excesses.  

Cash advances on credit cards often incur an immediate daily interest hit instead of a charge calculated monthly. Don’t be fooled by interest-free offers on credit cards. Once the period is over, you will pay substantially more in interest.

It’s the thought that counts

Remember, when it comes to Christmas giving, it’s the thought that counts. Often experiences leave lasting memories, while material gifts such as a television or golf clubs statistically do not have the same level of satisfaction, especially when the novelty wears off. A handcrafted or well-considered gift such as a framed photo will often be more appreciated as the friend or family member receiving the present feels you went to some extra effort.

There is also eBay, Facebook and Gum Tree where you can find unwanted gifts still in their original packaging. By going online, you might find some Christmas gifts that are selling for half the regular retail price.

To finish, if you enjoy shopping, set up a Christmas savings account now for next year through your bank or credit union now. A Christmas saving account will mean you have some cash available during 2019 when the sales and bargains hit the internet.