Spending Wisely on Gifts This Christmas

If you’re gearing up for a Christmas you and the family won’t soon forget, you may be tempted to put everything on the credit card or AfterPay (or similar Buy Now, Pay Later service like Klarna or Zip) and forget until the bills are due. Is that the best option? Rather, you should consider a small loan when borrowing money for gifts.

The Credit Trap

Spending up big on the credit card is definitely the more convenient option – hand over the card and forget about it until the bill arrives. However, a credit card will attract a lot more interest – and unless you pay off the entire balance in your interest free period (assuming you have one) you will incur interest anywhere from 12%p.a. if you have an ultra-low-rate card, to 25%p.a. for platinum and rewards cards. Personal finance expert and Savvy Managing Director Bill Tsouvalas explains:

“A credit card is a type of revolving credit; it doesn’t ever reach zero because you’ll have to pay an annual fee just for having it in your pocket. Paying off the minimum just rolls the balance and the high interest over and over and can take years or decades to pay off. Buy Now Pay Later services are also linked to credit cards, so it’s a double ‘set and forget’ problem – you’ll be paying a lot of interest either way.”

Small Loans means each repayment counts

Small loans are handy because they don’t require a lot of documentation like a large personal loan, are convenient, and every repayment you make gets you closer to a zero balance. “Small loans are capped at $5,000, have government-mandated fees on them, and are short-term solutions for short-term purchases such as presents and food. Since it uses the latest technology, you can apply for small loans day or night – the choice is yours!”

If you’re unsure about small loans, consult a financial professional to see if they’re right for you.