You and your credit card – summer friends, autumn enemies

Last updated 19 December 2022

The lead-up to Christmas can be a mad rush to finish all the things we have been putting off, buy presents, fund holidays, and juggle everything to make sure the festive season is a special one for the whole family. 

When things are busy, even the best-laid plans for finances can come under pressure. It can be appealing to put purchases on your credit card and deal with them later, but this can add money worries to an already stressful time, and get in the way of achieving your financial goals for the new year. There’s a lot you need to know about credit cards, so make sure you understand all the benefits and pitfalls before you start swiping.

The pros and cons of credit cards

Credit cards can be a useful tool when managed well, but they can easily take on a life of their own. While they can be a great way to make sure you can pay for unexpected costs you need to cover, it can be easy to forget how expensive they can be. 

Most credit cards have a limited number of interest-free days on purchases, so if you don’t pay off your card balance within that timeframe, you’ll be charged interest. This can add up very quickly so it's best to stay on top of payments and pay off your purchases as quickly as you can. 

Missed payments can affect your credit score, impacting your chances of getting a loan in the future, and ongoing debt might reduce the amount you can borrow. If you do spend a little too much this summer and are struggling to pay off your credit card balance, talk to your provider about what options are available to you. You could consider transferring your balance to a card with a lower interest rate. 

Choosing your credit card

There are many different credit cards, and they all have their own unique combination of fees, interest rates, interest-free days, rewards and perks.

It can be easy to get excited about the rewards that come with some credit cards, but surveys have found about 60% of people either break even or lose money with credit cards, so make sure you understand whether those rewards are worth it. Instead of focusing on potential rewards, have a look at the current interest rate and fees.

Here are some top tips for choosing a credit card:

• Shop around for the best credit card offers for you
• Find the best current interest rate – these can vary a lot, and interest rates can change 
• Compare fees and interest-free days between cards 
• Check the benefits and rewards available, but weigh them up against the above.  

Canstar and Interest.co.nz both have handy comparison tools to help you understand the costs and benefits of different credit cards. 

Financial planning for the next festive season

To get on top of your finances for the future, consider setting up a savings fund for next year's festive season. Some savings accounts offer interest, which could help you grow your savings more over the year. It’s always a good idea to make a realistic budget so you know what kind of payments you have coming up, and how much money you have to meet any unexpected expenses. 

Sorted and MoneyHub both have handy guides to manage your credit card and make sure you get the best out of it without falling into debt.