Develop an interest in paying off Christmas debt on credit cards

Don't be tempted to spend on new card

Take time to draw up budget

THE shock of receiving the credit card bill full of Christmas spending or overspending is about to be felt by many.

As a result, the new year may need to start with a debt repayment plan, some belt-tightening and a savings plan for next Christmas.

Community CPS Australia manager of products and member value Brontie Chambers says an effective option for repaying credit card debt quicker is to transfer the balance to a low interest-rate card.

"You can be paying 18 or 19 per cent on an ordinary credit card but there's a lot of low interest rates out there to transfer to some as low as 3 or 4 per cent,'' she says.

"That's an enormous saving.''

Ms Chambers says while low-rate cards are often much cheaper than personal loans, it's important that people are not tempted to spend any extra on the new credit card.

"Most financial institutions will want to sell you a higher limit because they want you to spend at a higher rate,'' she says.

"But if you can resist that and get a low balance transfer, you're much better off. If that doesn't work, things like personal loans and consolidating some of your debts might be the answer.''

NAB financial planning manager Sharon Walker says people who consolidate credit card debt with their home loan must ensure they pay extra off the mortgage, or they'll be paying off Christmas 2009 for the next 20 or 30 years.

Ms Walker says everyone should take the time to complete a budget with savings goals to avoid getting into debt again.

"It's a time-consuming job but you need to look at exactly what your income is, what your expenditure is and what's left,'' she says.

Your January credit card statement should give you an idea of what you need to save.

The founder of website www.simplesavings.com.au, Fiona Lippey, says people can have fun stretching food left over from Christmas.

"They can use the grocery money they would have spent to get ahead financially.''

Our Christmas splurge

2006 $32.85 billion

2007 $36.5 billion

2008 $37 billion

2009 $38.7 billion

Source: Australian Retailers Association