Australians tipped to rack up $56B on credit cards before 2017 ends

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Credit Card Purchases
A shop assistant uses an eftpos system at a Specialty Fashion Group owned Katies store in Sydney December 11, 2012. Reuters/Tim Wimborne

Australians are being reminded not to overspend using their credit cards that would land them in severe debt this Christmas season. Shoppers are tipped to rack up $56 billion on credit in November and December or $3342 per person.

This is a 1 billion extra than for the same period in 2016, according to financial services firm Canstar. The firm’s spokesman said Aussies are spending more today using their credit cards.

Canstar spokesman Steve Mickenbecker has warned about the dangers of plastic debts that can’t be paid off in full. Severe debt can hit customers hard with interest rates as high as 25 percent.

Plastic debt

Mickenbecker noted that back in 1996, Australians spent only $3 billion on their credit cards in the month of December. “Fast forward 20 years to December 2016 and we are spending more than nine times that at $28 billion,”news.com.au quoted him as saying.

Figures from Reserve Bank of Australia shows that Aussies are already buried in severe plastic debt. Australians have $51.4 billion owing and over $31.4 billion is accumulating interest.

For those who will use their plastics this Christmas, Mickenbecker recommends setting a payment plan to ensure debt is paid down as soon as possible. A shopper who racks up $3342 on plastic with an average interest rate of 17 percent and pays only the minimum amount off will shoulder up to $3800 in interest.

Certified financial planner Patrick Canion encouraged shoppers to set a limit on spending before going into the battlefield of Christmas shopping. He pointed that this way, shoppers can’t get ambushed by unexpected spending.

For those collecting hotel loyalty points from credit cards, the American Express Explorer and Business Explorer cards offer the country’s highest uncapped earning rate for Hilton Honors points on daily purchases, according to Australian Business Traveller. Two Hilton Honors points per dollar spent on most purchases can be obtained from the American Express Business Accelerator Card via the Membership Rewards Ascent program.

Early discounting

Deloitte’s Retailers’ Christmas Survey has found that shoppers won’t have much luck with discounted goods this year as stores won’t be as eager to offer discounting ahead of Christmas Day. “During Christmas 2016 we saw many retailers pay the price for heavy and early discounting, with first quarter sales in 2017 proving to be a challenge for many,” Deloitte spokesman David White said, adding there seems to be a determination not to fall into the same trap.

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