My Account
I remember in the 80’s when credit cards were a relatively new thing in New Zealand and getting one was a real novelty.
If you got one it meant a whole new sense of freedom and the envy of your friends! You could dine out at a restaurant and the bill would magically get paid with a simple zip zap of the plastic card. Who remembers that catchy TV advert, Zip Zap National Bank visa, where the guy was virtually dancing down the main street of Parnell with arm loads of shopping purchased on the plastic.
There is no doubt that the credit card is convenient, you can pay it off over time, you get a statement that lists all your purchases and they are great when travelling overseas or buying goods online.However, in the wrong hands they can set you on a course of financial disaster. I have seen people with four and five credit cards all at their limits trying to juggle payments and barely being able to afford to pay the interest, let alone pay off the core debt.
In fact, a quick look at the Reserve Bank website shows that Kiwis owe, as at October 2015, $6.459 billion on credit card debt. This is up from $6.284 billion in 2014 and $5.945 billion in 2013. The average interest rate on this debt is a whopping 18.1% pa. A quick calculation shows me that Kiwis are now paying $1.137 billion a year in interest costs (mainly to overseas banks) on our credit card debt. This is money lost out of our pockets each year for a simple zip zap (or Paywave now).
In fact, for a more eye watering figure as at September 2015, Kiwis owed $222.8 billion on all consumer debt (mortgage and consumer debt). Why am I quoting these figures? It’s not to scare you, but simply to point out that there may be a better way for you to pay this Christmas, than via the plastic.
There may be a better and cheaper way to borrow than using a credit card. For instance, as a rule of thumb, mortgages are cheaper (4.3% at present) maybe you could get a top up? Secondly, personal loans from the bank are cheaper than credit cards, peer to peer lenders are a cheaper way to borrow personal loans than credit cards (there are a number of new entrants in this market).
Can you consolidate your debts onto a mortgage and reduce the interest rate? And, finally, if you need to use the plastic, do you have the best credit card for your needs as there is a lot of competition in the credit card space. Are you able to do a balance transfer at 0% interest and make some in roads into paying off the core debt? There are so many options when it comes to credit cards, low interest, high fee, high fee, low interest, interest free terms, rewards options and air point options. There are sometimes up to five or six different credit card options from each provider.
My suggestion is to have a look at the following independent website Canstar which reviews and rates most financial products. Check it out at canstar.co.nz and click on the credit card section. Have a wonderful Christmas and a plastic free New Year!
