Beware of the Boxing Day binge this sale season
Consumer advocate RateCity.com.au is warning Australians to keep track of their spending in the post-Christmas sales, with the national total expected to hit $19.5 billion, according to the Australian Retailers Association.
Last month’s ASIC report into the buy now, pay later sector found shoppers could get into trouble when using interest-free platforms such as Afterpay.
The report found in a 12-month period, 20 per cent of users went without essentials as a result of overspending using these platforms, while 15 per cent had to take out other loans to make ends meet.
RateCity.com.au research director Sally Tindall said this year’s Boxing Day sales would be unlike any other with more people opting to hit the shops from the comfort and safety of their own homes.
“If you’re planning to hit the sales online, keep a tally of what you spend. Lugging around shopping bags might be a pain but they’re a pretty good reminder of how much you’ve bought,” she said.
“It’s much easier to lose track of your shopping online. It only takes a few clicks to get yourself into hot water.
“Buy now, pay later platforms such as Afterpay might be interest-free, but they’ve still got the capacity to cause havoc on your finances if you end up overspending.
“If you’re putting your purchases on a credit card, make sure you can pay the total in full when your next bill comes in.
“The last thing you want is to start 2021 shackled in debt,” she said.
Tips if you are planning to use a credit card or a buy now pay later service in the sales:
- Give yourself a strict spending limit before you hit the sales.
- Don’t impulse buy. Delay any big-ticket items for at least 24 hours.
- Make sure you have enough money to pay your debt back before you get stung with fees or interest.
- If you’ve overspent, don’t be afraid to return some of your shopping.
Common buy now, pay later traps:
- Impulse buying – buy now, pay later platforms often encourage customers to keep shopping. Try and stick to buying things you actually need.
- Falling into overdraft – repayments on Afterpay are automatic, which means if you don’t have enough money in your account you could end up going into overdraft with your bank.
- Running out of money at the end of the month – ASIC found over a 12 mth period, 20 per cent of users didn’t have enough money to pay for essential items because they overspent.
- Using more than one platform at once – ASIC found people getting themselves in trouble were often using multiple forms of credit at once.
Common credit card traps:
- Not paying your balance in full every month – if you don’t pay your entire bill, you’ll lose your interest-free days and get hit with interest charges.
- Spending more to get points – if you’re spending more just to earn rewards points then your credit card might have gotten the better of you.
- Paying just the minimum – you could end up on a debt treadmill and have to fork out hundreds in interest.
- Using your entire credit limit – just because the bank has approved you for $10,000, doesn’t mean you should spend that much.
Afterpay vs average credit card
|Product||Where you can use it||Free period (before interest or late fees)||Interest rate||Minimum repayments||Annual fees||Late fees||Credit limit|
|Afterpay||Affiliated retailers only||up to 57 days||None||4 payments over 6-8 wks||None||Max fee 25% per purchase or $68 whichever is lower.||up to $2,000|
|Average credit card||Anywhere Visa or Mastercard is accepted.||up to 52 days. If you have a balance owing, interest applies from day 1.||
|$19.50 a month||$10K|
Source: RateCity.com.au. The average credit card is based on the averages of each category in the RateCity.com.au credit card database.
Note: The Boxing Day spend forecast is based on combined research from the Australian Retailers Association and Roy Morgan.