Every year, the end of financial year sales grow bigger and become more exciting. But come July and August, our new credit card bills can leave a bit of sting in the tail.
So, what can cardholders do to nip an end of financial year (EOFY) sales credit card bill in the bud before it becomes a debt hangover? And are there any alternatives worth considering that can keep our balances in the black?
What to know before you buy
Before you begin a click-frenzy of EOFY sales shopping, it’s worth keeping in mind a few key factors about how you spend, and what you’re spending with.
Ensure you’re aware of exactly what your number of interest-free days are with your credit card before you checkout with your basket of goodies. Not all credit cards will offer this, but the most common amount is around 44 - 55 days.
This should be on your card statement and may be found online or from speaking to a customer service representative. This way you can keep track of where in your statement period you’ve made the purchase and exactly how many days you have until said purchase begins accruing interest.
Speaking of accruing interest, knowing your credit card’s purchase rate is fundamental, especially if you can’t pay your balance in full by the end of the statement period
Knowing your purchase rate may help with budgeting for credit card bills, and it may help you to know if you’re paying more than you can afford in interest. The average credit card purchase rate has sat around 16 per cent on the RateCity database for many years now, but there are a number of low-rate credit cards with offers below 10 per cent.
If you’re shopping in the EOFY sales on an overseas website, there is a chance your credit card provider may hit you with a range of fees, including:
- Currency conversion fees (USD to AUD for example)
- Foreign transaction fees (usually around 2-4 per cent of total transaction amount)
All these fees can add up, especially if you’re making multiple sales purchases across several websites. It’s worth looking into what your card issuer charges and keeping this in mind as a figure to add on to your purchase.
Buy now, pay later
If the above is starting to make you nervous, there are alternative payment methods to using your credit card on the EOFY sales. Buy now, pay later platforms (BNPL), such as Afterpay or Zip Pay, allow customers to make payment instalments on full-priced purchases. Generally, this involves something like dividing the cost of one sale into four smaller instalments, to be repaid each fortnight. Arguably the biggest advantage of BNPL over a credit card is that the platform does not charge you interest on your outstanding balance.
It’s become commonplace for online retailers to offer BNPL options at checkout. Just keep in mind that each platform may come with its own set of fees. Also, if you link your credit card to the BNPL platform, then you still run the risk of accruing interest on your purchase. It may be worth considering linking it to your debit card instead.
How to pay off your EOFY sales credit card bill
You know your credit card purchase rate, the overseas fees you may be charged and exactly how many days interest-free you have until you accrue debt. Now, consider the following to help you pay off your credit card bill.
- Budget carefully - Whether you have 55 days or 15 until your credit card balance starts accruing interest, there is time to adjust your budget to afford repayments on your balance. Consider all the ways you can reduce your expenses, such as pausing subscriptions services, dinners out or gym memberships for a few months. Put all your spare change and savings into repaying your EOFY sales credit card bill so you don’t accrue interest and run the risk of growing debt.
- Make some extra cash – If you’re unsure you’ll pay off your balance in full, consider making some extra cash by selling your belongings. It’s never been easier to do a spring clean, dust off your old treasures and sell them on platforms like Facebook Marketplace of Gumtree. Even consider helping people run errands for cash through AirTasker or taking up a weekend job, if possible.
- Balance transfer – Everyone needs a helping hand every now and then and this is where a balance transfer may come in. If you’ve blown your budget with EOFY sales spending and are struggling to get on top of your credit card debt, consider transferring it to a zero per cent balance transfer credit card. The no-interest offer generally goes for several months, if not years, and can offer much needed breathing room to get on top of your debt once and for all. Just be sure to pay off your card balance before the interest-free period ends, or the card will revert to a higher ongoing rate.