A third of Australians are expected to spend this Black Friday weekend

A third of Australians are expected to spend this Black Friday weekend

Millions of Australians are readying to spend big during the four day weekend known as the ‘Black Friday’ sales, even though they’ve spent recent months stockpiling savings and paying down credit card debt.

ING Research suggests 8.3 million Australians -- almost a third of the country’s population -- are planning to buy goods during the ‘Black Friday’ and ‘Cyber Monday’ shopping weekend, commencing tomorrow and ending on 30 November.

The research, a national survey of 1016 people conducted in November, found about 2.9 million people will be shopping during the event for the first time.

“Value for money matters more now than it has in a long time,” George Thompson said, head of daily banking at ING.

“So it makes sense that so many Aussies are planning ahead and using the ... sales to shop for gifts and important upcoming events.”

People are widely expected to stockpile their purchases for upcoming events. About 58 per cent are hoping to pick up discounts on gifts for Christmas, birthdays and back to school items

A sales spike greater than 400 per cent

The four day shopping season has led to a surge in online purchases -- and social distancing measures could help the trend grow.

Sales were up by 465 per cent on Black Friday last year when compared to the prior three weeks, according to CBA, and 107 per cent on Cyber Monday.

Clothing sales were up by 264 per cent, while furniture, household appliances and hardware sales lifted by 202 per cent.

“Some of our major retail clients will be extending their Black Friday and Cyber Monday sales to capitalise on increased retail spending,” Jake Potgieter said, managing director for industries, transport and consumer at CBA.

“By all indications, many of our clients are preparing for the largest online sales period on record.”

A shopping frenzy during a pandemic

Australians have been doing the opposite of spending during the COVID-19 pandemic. The people in a position to do so have been paying down debts and stockpiling savings, giving them the breathing room to spend.

People have been squirreling away more of their money, according to the most recent data from the Australian Bureau of Statistics (ABS). The households savings to income ratio was 19.8 per cent for the June quarter, up from 7 per cent when compared to the previous quarter.

This was almost twice as high when compared to the Global Financial Crisis, when the ratio was 8.9 per cent lower at 10.9 per cent.

Savings, Mastercard or Afterpay?

How we pay for things has changed a little and the pandemic appears to have hastened some of it. Some people are using credit cards less, while others are turning to buy now pay later options.

Australians lowered their credit card debt by $6.91 billion in the six months to September, according to the Reserve Bank of Australia (RBA), dropping the national credit card balance to $26.98 billion -- its lowest level since late 2004.

There were about 654,000 credit cards less over the same period, a drop of 4.8 per cent, reducing the total number to about 13 million.

Despite the debt being paid down, there are signs people are gearing up to spend again, as transactions increased from August to September.

“People were clearly out shopping more and putting more on their cards,” Sally Tindall said, research director of RateCity.

“The question is whether they are going to continue to be diligent in paying down their debts.”

Conditions -- increased savings, lower debts, lock downs and a sales bonanza -- could see people making purchases on their credit cards during the Black Friday sales.

“If you’ve focussed all year on clearing your credit card debt, try and resist the temptation to blow the budget this Christmas,” Ms Tindall said, “otherwise you could find yourself back to square one in the New Year, struggling to pay down high-interest debt.”

Late fees have people skipping essentials

The prospect of a big spending weekend comes after the corporate regulator released a controversial report on the nascent buy now pay later category.

The Australian Securities and Investment Commission (ASIC), having analysed data from the six large providers, four banks and a consumer survey, found one-in-five people were skipping essentials like meals to avoid paying late fees.

“Buy now pay later arrangements are clearly popular as a payment method,” ASIC said. “While working for the majority of users, some consumers are suffering harm.”

There were 6.1 million accounts with Afterpay, BrightePay, Humm, Openpay, Payright and Zip Pay in 2019. About 21 per cent of them were being charged late fees, amounting to $43 million.

And out of the 1.1 million late transactions, 45 per cent were being hit with them multiple times.

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Fact Checked -

This article was reviewed by Head of Content Leigh Stark before it was published as part of RateCity's Fact Check process.

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Learn more about credit cards

How to calculate credit card interest

Credit card interest can quickly turn a manageable balance into unmovable debt. So being able to understand how interest rates translate into dollars is an important skill to acquire.

The common mistake people make is focusing on the credit card’s annual percentage rate (APR), which often sits between 15 and 20 per cent. While the APR does provide a rough idea of how much interest you’ll pay, it’s not entirely accurate.

This is because you actually accrue interest on your balance daily, not annually. So, you need to work out your daily periodic rate (DPR). To do this, divide your card’s APR by the number of days in a year (e.g. 16.9 per cent divided by 365, or 0.05 per cent). You can then apply this figure to the daily balance on your credit card.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

What is a credit card?

A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.

How to pay a credit card from another bank

Paying or transferring debt from one lender to the other is called a balance transfer. This involves transferring part or all of the debt from a credit card with one lender to a credit card with another. As part of the process, your new lender will pay out the old lender, so that you now owe the same amount of money but to a new institution.

Many credit card providers offer an interest-free period on balance transfers to help new applicants better handle their debt. During this period, cardholders are not required to pay interest on the debt they brought over from the other card. This can be a great opportunity for consumers to pay off credit card debt with no interest. There are often fees associated with balance transfers; normally, these are a percentage of the amount transferred.

So make sure you read the terms and conditions of the card before transferring any debt across.

How to get a free credit card

There's no such thing as a free lunch. All credit cards come with associated costs when used to make purchases, even if it’s simply the cost of making repayments.

However, many lenders offer incentives for customers such as a $0 annual fee or 0 per cent interest on purchases during an introductory period. Additionally, paying off your balance in full during an interest-free period means you could only have to pay back the cost of purchases without interest. You could also be eligible for additional rewards such as cashback during that time, saving you more money.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

How to get rid of credit card debt

  1. Calculate your debt. Credit card calculators make it easy to determine the repayments required to chip away at your debt in the shortest timeframe possible for your budget.
  2. Repayment plans. Take some time to formulate a credit repayment plan. Consider increasing your income, scaling back your lifestyle or refinancing.
  3. Talk to your credit provider. If you’re still struggling with your debt, give your credit provider a call. You may be able to come to a new arrangement.

How is credit card interest charged?

Your credit card will be charged interest when you don’t pay off the balance on your credit card. Your card provider or bank charges you the individual interest rate that is associated with your card, which is usually between 10 and 20 per cent. 

The interest will be added onto your bill each month or billing period if you don’t pay off the balance, unless you are in an interest-free period.

You will be charged interest on anything that hasn’t been paid for inside the interest-free period. Usually you will receive a notice on your bill or statement saying you will be charged interest so you have some form of notice before you’re charged.

How do credit cards work?

Think of credit cards as a short-term loan where you use the bank’s money to buy something up front and then pay for it later. Unlike a debit card which uses your own money to pay, a credit card essentially borrows the bank’s money to fund the purchase. When you apply for a credit card, the bank assesses your income and assigns you a credit limit based on what you can afford to pay back. At the end of each billing cycle, which is usually monthly, the bank will send you a statement showing the minimum amount you have to pay back, including any interest payable on the balance.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

What is the lowest monthly repayment on my credit card?

As a rule of thumb, this tends to be around 2-3 per cent of the outstanding balance. You can choose how much you want to repay each billing period as long as it is higher than this minimum required amount.

Which credit card has the highest annual percentage rate?

The credit card market changes all the time, so the credit card with the highest annual percentage rate is also liable to change.

Keep in mind that credit card interest rates are expressed as a yearly rate, or annual percentage rate (APR). A low APR is generally good but also consider:

  • There can be different APR's for each feature of the card (e.g. purchases may have an APR of 14 per cent, while cash advances on same card could have an APR of 17 per cent.
  • Credit cards with a variable rate can change throughout the year, affecting your APR, so check the full details.
  • If you pay your balance in full every month, having the lowest APR is not as important as the other fees associated with the card. However, if you carry a balance from month to month, then you want the lowest APR possible.

Does ING increase credit card limits?

You may want to increase your credit card limit for many reasons, such as having access to more spending money. However, if you are using the Orange One credit card issued by ING, you may not be able to do so. 

ING customers can choose a credit limit of their preference when applying for the Orange One credit card. Depending on your financial situation, this limit can be anywhere between $1,000 and $30,000. If you qualify for a Rewards Platinum card, the minimum credit card limit will likely be $6,000. 

Ideally, you should set your credit card limit knowing how much you can afford to repay each month and keep your expenses lower than this level. With most credit cards, you should have the option of requesting a credit card limit increase at a later time, although you will need to qualify for any increase. With an ING credit card, limit increases are out of the question (at the time this was published), which means you may want to apply for a higher credit card limit from the beginning. Remember that you have the option of decreasing your ING credit card limit at a later time.