Beware the Christmas credit trap

Posted On October 25, 2006

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The secret is creating a budget and then sticking to it. It’s an exciting prospect for shopping pros, Christmas is only two months away.

However, for the inexperienced or reluctant holiday shopper, hitting the malls with only 61 days left can be a painful and pricey endeavour. Not to mention credit cards can take quite the beating! Greg Borden, educational co-ordinator and credit counsellor with PricewaterhouseCoopers Inc. in Sydney, said creating a budget beforehand and sticking to it is essential.

“You have to sit down and do a little planning,” he said, at the George Street branch office of the international accounting firm. “People should ask themselves, ‘What can I realistically afford for me and the family and how many people are I going to buy for?’”

It’s tempting to swipe the Visa or MasterCard while shopping for loved ones and worry about the costs of indulging them in January. It may become a challenge to make minimum payments on credit cards, if too much debt is piled up on credit cards.

Bad money management can easily spiral out of control and lead to bounced cheques, accounts turned over to collections agencies and a poor credit rating. And in most cases a person with a bad debt load that’s gotten only worse with the addition of buying expensive Christmas gifts will only seek out professional help once the situation turns dire, Borden said.

Rita Anderson, who’s in charge of the PricewaterhouseCoopers branch in Sydney, said simple steps such as walking through a mall before making an impulse buy can be the difference. “Take a walk through, go into all of the stores first, and then come back if that’s what you want because it gives you time to think about it,” she said.

Borden said anyone living outside their means must take stock and outline a realistic budget. It also means totalling up expenses, including all household debt. If paying off the household debt takes longer than three to five years, Borden said it’s time to seek help.