Irish families are estimated to spend in excess of €2,690 on Christmas. This includes spending for presents, food and other essentials.
That figure alone is sizeable when one factors the time it takes to earn and then save the cash. Plus, it is after-tax cash so it takes that bit longer to really save. Of course, not everybody has €2,690 cash which is why some people borrow to get them over the line.
And this is where the real cost of Christmas can really add up.
Credit cards offer a really flexible means of borrowing and when managed correctly, can actually provide a low-cost or no cost means of borrowing…provided they are paid off quickly. However, this is not what a lot of people actually do. Instead, they carry a credit card balance from month to month and many opt for the minimum payment option of repayment.
Paying a credit card debt using the minimum payment, while convenient on a family budget actually cost bundle in interest, here’s why:
Let’s take a family that will spend €2,690 on Christmas. If they have €1,690 saved already, this means they use their credit card to cover the other €1,000. So, they borrow €1,000 on the credit card.
The credit card operates as follows; it charges an 18% rate of interest and it requires a minimum payment of about 2.5% of the outstanding balance. Without getting into all of the repayment mathematics, every month the borrower makes a payment to the credit card company, they also get charged interest on the outstanding balance. It’s like two steps forward and one step back.
To make a long calculation short, the €1,000 debt on the credit card can take as long as 16 years to repay and cost an additional €1,063 in extra interest. This calculation is based on the rate of interest (18%), the minimum percentage monthly payment (2.5%) and the floor payment of €5 (which kicks in when the 2.5% produces a payment less than €5).
Sounds complicated? It is! But, to keep this really simple, remember this: paying off a credit card balance quickly is the best way of avoiding expensive interest charges. Of course, the best way of keeping interest charges under control over the Christmas season, if you have to borrow is by using a term loan.
Here at St. Joe’s, we offer members a great deal; up to €2,000 over 12 months at a rate of 7.9% / 8.22% APR with weekly payments of under €41 (€40.13). Total cost of credit in this case is €2,087.
Irish families are estimated to spend in excess of €2,690 on Christmas. This includes spending for presents, food and other essentials.
That figure alone is sizeable when one factors the time it takes to earn and then save the cash. Plus, it is after-tax cash so it takes that bit longer to really save. Of course, not everybody has €2,690 cash which is why some people borrow to get them over the line.
And this is where the real cost of Christmas can really add up.
Credit cards offer a really flexible means of borrowing and when managed correctly, can actually provide a low-cost or no cost means of borrowing…provided they are paid off quickly. However, this is not what a lot of people actually do. Instead, they carry a credit card balance from month to month and many opt for the minimum payment option of repayment.
Paying a credit card debt using the minimum payment, while convenient on a family budget actually cost bundle in interest, here’s why:
Let’s take a family that will spend €2,690 on Christmas. If they have €1,690 saved already, this means they use their credit card to cover the other €1,000. So, they borrow €1,000 on the credit card.
The credit card operates as follows; it charges an 18% rate of interest and it requires a minimum payment of about 2.5% of the outstanding balance. Without getting into all of the repayment mathematics, every month the borrower makes a payment to the credit card company, they also get charged interest on the outstanding balance. It’s like two steps forward and one step back.
To make a long calculation short, the €1,000 debt on the credit card can take as long as 16 years to repay and cost an additional €1,063 in extra interest. This calculation is based on the rate of interest (18%), the minimum percentage monthly payment (2.5%) and the floor payment of €5 (which kicks in when the 2.5% produces a payment less than €5).
Sounds complicated? It is! But, to keep this really simple, remember this: paying off a credit card balance quickly is the best way of avoiding expensive interest charges. Of course, the best way of keeping interest charges under control over the Christmas season, if you have to borrow is by using a term loan.
Here at St. Joe’s, we offer members a great deal; up to €2,000 over 12 months at a rate of 7.9% / 8.22% APR with weekly payments of under €41 (€40.13). Total cost of credit in this case is €2,087.
To work out your loan repayments, use our online calculator www.aviationcu.ie/loans/calculator