Do you know how much money you spent last Christmas? Most of it was probably on food or drinks or presents, but some had to fork out extra for travel. Overall, Australians were expected to spend $48.1 billion over the Christmas period, according to the Australian Retailers Association in a December 8 media release1. As much as $8.8 billion of that was to be put toward gifts, either for others or for personal use, as researched by Society One and reported in a Sydney Morning Herald article from November 282.
How are people with bad credit expected to keep pace?
With so much money being spent over such a small period of time, for one holiday, how are people with bad credit expected to keep pace? If you have a bad credit score, or are struggling to repay past debts, there's little you can do to spend lots of money over Christmas, like you probably want to. We all want to treat our loved ones over the silly season, but some find it harder than others to do that.
Why is a credit report useful around times we plan to spend a lot?
Your credit report will show you how well you've dealt with debts in the past, or even if you've failed to pay some off on time. It could have seriously affected your credit score, and you'll then find it hard to take out a new line of credit and spend more on presents or entertaining.
If you're planning on spending up large over a holiday period or because there's a special birthday coming up, it might be worth checking out your current credit report. If it's lower than you expected, it's a good idea to restrict your spending as much as possible, and direct your excess money toward paying off debts and bills quickly, rather than on flights or expensive food and drink. If you don't know what is on your credit report before you spend a lot of money, you might get a nasty surprise when you realise you need to pay off a chunk of bills quickly.
How do Australians spend over the holiday period?
Australians are touted to spend upwards of $17 billion between December 26 and January 153. With retailers making the most of people being in a generally jovial mood and many having received gifts of money for Christmas, it's no wonder people spend so much on gifts after the holiday.
More than half of the total Christmas spend for Christmas in 2016 was expected to be on credit.
Even with the prospect of cash gifts for Christmas, many Australians still choose to use their credit cards to buy personal items. More than half of the total Christmas spend for Christmas in 2016 was expected to be on credit, according to Society One2. So, how quickly can people pay off their Christmas debts? Not nearly as slowly as you might think, for the most part.
According to MoneySmart research, 80 per cent of people with credit card debt accrued over the Christmas period pay it off within three months4. Only 11 per cent take between three and six months, and 7 per cent take more than six months4. The remaining 2 per cent either struggle to pay it off at all, or pay it off immediately.
Struggling with your current credit score? It's not a good idea to add more debt to your list of bills by using your credit card to pay for gifts. Instead, you'll want to limit the amount you spend, not just on gifts, but also on food and drink and other non-necessary items. Don't fall into the trap of adding debt to your existing bills because buying on credit is the easiest thing to do. Be responsible with your future spending, especially around the holidays.
Before you do anything, make sure you get in touch with My Credit File for information about your current credit score.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.
1. Australian Retailers Association. Top product searches revealed, online sales to hit $3.4 billion this Christmas. Accessed January 2017.
2. Sydney Morning Herald. Australia to spend $8.8 billion on Christmas presents, more than half on credit. Accessed January 2017.
3. Australian Retailers Association. ARA predicts Aussies to spend big after Christmas. Accessed January 2017.
4. MoneySmart. Australia's Christmas spending. Accessed January 2017.