We’ve all felt that rush and sense of achievement when we snag a fantastic retail bargain, but according to experts, around six per cent of the population have a compulsive shopping disorder, or oniomania, and it can have detrimental effects.
Financial problems may occur if you start to borrow more than you can afford to pay back. This can lead to growing financial anxiety and stress that impacts all aspects of your life, including your credit history.
According to Australia Counselling, one of the most detrimental consequences of compulsive shopping is financial strain.
“People can be carrying huge credit card debt and be struggling to cover the minimum payments… When people are regularly and compulsively shopping to meet psychological and social needs, comparable behavioural patterns and consequences to substance addictions can arise. The person will continue to shop and spend despite negative consequences such as financial strain, interpersonal stress and a sense of spiritual emptiness.”
If the debt collectors are at your door, it’s time to take control of your finances.
Repair your credit score
One of the main concerns for overspending is how this can impact your credit score.
Your credit report can be obtained online at Veda Advantage’s website. A low score will limit your ability to obtain a home loan, credit card, personal loan and many other aspects of your financial life. Lenders review your credit report when deciding whether to approve you for a loan or credit, and approval or rejection will come down to whether you appear to be at risk of not paying back the money you’re borrowing.
If your overspending has grown into substantial unpaid debt, and you’re concerned about the damage you’ve done to your credit score, follow RateCity’s guide to repairing your credit score.
Multiple credit cards = multiple debts
If you are currently paying off credit card debt, don’t fret, as you are not alone. The Australian Securities & Investments Commission (ASIC)’s credit card debt clock monitors and reports how much Australians owe on credit cards based on Reserve Bank of Australia statistics. The number owing (which is in the billions) can fluctuate depending on monthly trends.
When you start to use multiple credit cards to fund your shopping addiction, you will begin to grow multiple debts. It can be overwhelming to decide which debt to pay back first, so follow this guide:
1. Contact your credit provider
If you are having issues paying back debt, you should contact your credit provider immediately. Your credit provider is required under consumer credit law to consider hardship variations, such as flexible payment arrangements, to assist you in paying back your credit card debt.
Chased by debt collectors?
This requirement also applies to debt collectors, who will be able to assist you in creating a payment plan.
2. Choose the debt to pay first
If you’re able to budget an amount to pay your debt, ASIC recommends the following for choosing which debt to pay first:
Pay off the credit card with the highest interest rate first – In addition to making minimum payments on all cards, pay more on the card with the highest interest rate, so you pay off the total amount on that card first. Then work your way through your other cards.
Pay off the card with the smallest debt first – Keep making minimum payments on all cards, and pay more on the card with the smallest debt, so you pay off the total amount on that card first. Then work on paying off the next smallest debt, and so on.
3. Balance Transfer
Another option for helping to pay off multiple credit cards is to move your debts to a balance transfer credit card with a lower interest rate. This should alleviate some of the stress of paying back your debt, as they usually offer an interest free period that could range from 5 to 24 months. You’ll want to pay the balance before this period ends to ensure you don’t incur any additional fees or charges.
4. Seek financial help
If you are still struggling, it is recommended that you seek help from a financial counsellor. This is a free service offered to help people struggling to pay back debt by community organisations, community legal centres and government agencies.
If you believe you or a loved one may be experiencing oniomania (compulsive shopping disorder), or are experiencing any interpersonal stress, depression, anger or anxiety please contact a medical and/or mental health professional immediately