Credit Caution at Christmas

Noel Whittaker
Noel Whittaker

Christmas is coming so lets think about credit cards. They are certainly convenient, but the problem is that they can lure you  into debt - it is a big deal to extract $100 note from your wallet and hand it over in exchange for goods and services, but it’s an entirely different experience when the retailer processes your credit card.  When this happens, the pain is deferred to the end of the month when the credit card statement arrives.

People often ask if it’s a good strategy  to solve their credit card worries by consolidating their credit card debts with their housing loans.  In most cases, it will cause more harm than good because almost certainly they are in trouble because of bad money management.  Sure, consolidating their loans may give them some short term relief, but in a few months the credit card debts will have ballooned again and they will have the additional problem of a higher housing loan.

A better solution is to list all your personal debts and then use all your resources to attack the smallest one.  When that is paid off, use the money no longer needed for it to attack the next smallest one.  Keep doing this and you will be back on track in no time.

It is certainly possible to save some interest by moving to a lower interest credit card but you should still be aiming to pay 5% of today’s outstanding balance.  For example, if you had a debt of $5,000 you should cut up the card and then make repayments at the rate of $250 per month.  If the interest rate was 12% you would pay it back in 1.87 years with total interest of $607.  If the rate was 15% the term would still be less than 2 years and total interest would be just $790. 

Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. His email is

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