Every Christmas almost half of the Australian population decides to go swimming in credit card debt to get through the festive season. But there’s two big reasons why you shouldn’t do that this year.
Bad news: new data from St George bank shows that 46% of Australians haven’t saved up for Christmas gifts and need to use their credit card at the checkout.
Worse still, 1 in 3 people say they need to rely on their credit cards to survive.
While this may have worked for some families in the past, there are two new factors this year that should make them think twice about doing so.
Factor #1: New credit card rules from January 1
As of January 1, banks and credit providers will be required to check your debt-servicing capacity more thoroughly before issuing a credit card.
Essentially, credit providers will only approve your application if they’re satisfied you can repay the card’s credit limit, at its interest rate, within three years.
If not, you’ll be denied a credit card, or offered a lower limit.
In years gone by, credit card providers have gone on advertising blitzes for interest-free credit card deals in January and February.
So families who have made it an annual tradition to take up these offers will be due for a shock – they might not be able to transfer their full debt this time around.
This will either leave them with two credit cards to pay off, or worse still, one big debt already accruing interest.
Factor #2: It will be harder to get a home loan
It’s getting harder and harder to obtain a home loan due to the banking royal commission lending crackdown.
Even doctors are having detailed accounts of their living expenses examined with a fine-toothed comb before having finance approved.
They’re not just checking the last month or so, either. Lenders will trawl through your accounts for several months for any spending anomalies.
If a lender sees that you’ve thrown caution to the wind with your credit card over Christmas you might just be put on their naughty list and denied finance.
Essentially, that could hamper your chances of obtaining finance for a home loan until about April next year.
How we can help
It’s believed that the stricter rules on credit cards will have a knock-on effect on applications for all types of credit, according to some experts.
So if you’re already in debt trouble and would like help consolidating it into a personal loan, then the time to do so is before the new year, when your financing options could become more limited.
And if you’re not quite in credit card debt just yet, but the forecast isn’t looking so great, then get in touch.
We have plenty of great budgeting techniques we’d love to share with you to help ensure you have both a Merry Christmas – and a happy, credit card debt-free New Year!
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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