Jessica Wright is considering shifting her credit card debt to a balance transfer card with zero interest after a blowout over Christmas plunged the family finances into the red.
The Brisbane-based woman is facing a predicament shared by many Australians - the nation collectively spent about $30 billion on credit cards in December.
Ms Wright, 36, usually puts $4000 a month through a Coles Mastercard to earn Fly Buys points. But last month there was an extra $5500 in spending - she bought her parents flights to Hawaii for her mother's 60th birthday, bought Christmas presents for her three young children, and then the family's washing machine broke down.
On top of that the household income slumped because her husband, the family breadwinner, unexpectedly had less work than usual.
"I usually pay it off in full but there's no way it's going to happen this month," Ms Wright said. "There's a little bit of remorse because when I decided to buy the tickets for my parents, I didn't realise my husband's work would be all over the place - he usually earns good money but he had three weeks off over Christmas that we hadn't planned for so that made it hard. I knew it would be a struggle but not as bad as it got and the washing machine - well, I didn't see that coming."
Ms Wright said it made no sense to pay high interest on the Coles Mastercard so she'd look for a balance transfer deal. She believes she can pay it off before the higher interest kicks in, as long as the interest holiday is longer than six months.
Reserve Bank figures show a total $27.45 billion in credit card purchases for October 2017. Over the previous three years, December spending was on average 10 per cent higher than October of the same year. If that trend holds this year, the December spending on credit cards would have exceeded $30 billion. The Reserve Bank will release the official figures in February.
Four out of five credit card holders plan to pay off their Christmas-induced debt in three months or less, according to a survey of 1450 Australians by comparison site Finder in December. One in five will take longer than three months to service their debt.
Finder estimates the splurge could cost Australians $230 million in interest payments alone, taking into account a typical 55-day interest-free period.
Graham Cooke, insights manager at Finder, said a balance transfer to a card with an interest-free period was a good way to minimise interest charges.
"This over-reliance on credit cards in December means the cost of Christmas is carried well into the new year and could take a toll on household budgets throughout 2018," Mr Cooke said.
"A balance transfer could give credit card holders the chance to make more headway on their outstanding balance, especially if they're having difficulty making repayments."
Mr Cooke said there were more than 100 balance transfer cards offering zero per cent and more than half of them offered an interest-free period of a year or more.
However, Gerard Brody, the chief executive of Consumer Action, which runs the Victorian side of the government-backed National Debt Helpline, urged caution.
"Credit card debt is the number one reason people contact us for help with unmanageable debt," Mr Brody said. "For some people who can demonstrate the capability and discipline to pay the debt in full before the interest-free period is up, the balance transfer deals can work but in the main most people are better off taking steps to pay down their existing debt rather than taking on new credit. The problem is credit cards are a product where if the bank wins, the consumer loses."
Mr Brody said there's a lot of marketing for credit cards at this time of year and the balance transfer cards can seem like a good deal, promising zero interest for a period of time, but it can exacerbate people's problems because most credit card holders don't pay it off before the interest holiday ends, and the cards then revert to high rates of 20 per cent or more.
Another problem was people don't always close the previous card and then they wind up with two credit card debts.
"We see people with four or five credit cards, sometimes up to $100,000 debt, which can be really stressful and cause a lot of anxiety especially if they get referred to debt collectors," Mr Brody said.
He said it was free to call the helpline and speak to an independent financial counsellor.
National Debt Helpline: 1800 007 007