How to avoid financial pain over the Christmas break

Is Santa sucking the fat out of your wallet? Christmas is an expensive time for all but the wealthiest Kiwis and the worst Grinches.  Even if you only have to buy one or two Secret Santa gifts and a few drinks or Christmas cards, budgets have a way of getting out of whack at Christmas.

As a result the Banking Ombudsman is warning Kiwis to watch their bank balances this festive season and avoid incurring overdraft, honour, and dishonour fees.

After all you don’t want to wake up on New Year’s Day with a nasty financial hangover.

Track your bank balance

At some point in their lives every Kiwi has thought they had sufficient money in their accounts to cover their spending when in reality there wasn’t enough there. We’re all human and make mistakes.

Beware as well of assuming that a deposit has cleared when it hasn’t.  If you attempt to spend that money you’re likely to be pinged with bank fees, which isn’t a nice thing to do to yourself just before Christmas.

The honour and dishonor of overdrafts

Sometimes shoppers don’t even realise they’ve overdrawn their accounts. The payment goes through even though there isn’t enough money to cover it. In this situation banks usually charge an “honour” or unarranged overdraft fee and interest.  These fees can be as much as $25 or a pop.

Or if the bank chooses not to honour the payment they will often charge a dishonor fee. Either way it can push your accounts well into the red.

Free yourself from financial pain

Fees can save the embarrassment of having a payment declined at the checkout and for most people they’re just annoying, says the Ombudsman.

For a minority of Kiwis it leads to more serious financial problems, the Ombudsman points out.

It can end in a really painful financial mess if direct debits or automatic payments fail as a result of these honour, dishonor and overdraft fees.

Smart banking: how to avoid fees

If you want to avoid going into the red, we suggest you:

Check your balance before you go out as well as throughout the day if you’re on a shopping spree.  If you don’t have the app loaded on your smartphone you can always use telephone banking.

Do the maths every time you hand over your credit, debit, or EFTPOS card and make sure you’ve left enough money left in your accounts to cover your regular bills such as utilities and credit card payments.

Use your bank’s text alert service to alert you when your balance is getting low.

The Ombudsman recommends asking if your bank can load a “no overdraft” alert on your account – but make sure you understand how it works as alerts can differ from bank to bank

Create a Christmas budget or spending plan. If you earmark a certain sum for each present and also expenses such as food and alcohol and stick to those limits you should be able to avoid nasty surprises.

Get a better bank account

Make sure you shop around for accounts that meet your individual needs. Include credit unions and lesser known banks such as Heartland and SBS in your search.  Ask questions and make sure you understand all the charges.

If you do go into the red regularly choose an account that charges one unarranged overdraft fee a month instead of individual honour and dishonor fees.

While you’re at it, it’s a good idea to compare transaction accounts, and online banking and find out more about budgeting and saving money.  You can also check out Canstar’s Awards and Star Ratings here.

It also might be a good idea to get some free budget advice from a local budget service.  Find one by visiting the website.

Finally, check out the Ombudsman’s: Quick Guide to Overdrafts

Compare Savings & Everyday Transaction Accounts

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