This Xmas, make shopping with the plastic less drastic

Last updated 00:00 01/01/2009

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If you're planning to put your Christmas spending ‘on the plastic' you're not alone.

Last year, New Zealanders charged $2.273 billion to their credit cards for the month of December - a $249 million increase on the previous month.

Credit cards can be great if you always pay the balance in full each month and take advantage of interest-free days on your purchases. But with high interest rates, credit cards can also be a trap if you let your spending get out of control and aren't able to pay off your monthly balance when it's due.?

So here are three tips to make shopping with the plastic less drastic this Christmas.

1. Know your credit card

Credit cards differ in the number of interest-free days available and the fees and interest rates charged, so find these out before going shopping. Usually there's an 0800 number and a website address listed on the back of the card.

Remember you will only get interest-free days on your purchases if you paid the total balance of your last credit card bill in full by the due date.

2. Review your credit card limit

Ideally your credit card limit should be based on how much you can afford rather than how much you might spend. If you think you might reach your limit this Christmas and will have trouble paying it back, consider reducing your credit card limit now.

3. Control your spending by setting yourself a budget

Work out how much money you can realistically afford to spend this Christmas.? Know what you can afford to pay off your credit card each month in the New Year, remembering that to make headway you need to pay more than the minimum repayment.

The Retirement Commission's free personal finance website has a Credit card calculator and a Budget calculator that can help you work out what is right for you.

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