Don’t let a Black Friday spree send you into the red

Shoppers planning to hit the Black Friday sales are being warned to write out lists and set spending limits to avoid overspending or getting caught up in unnecessary debt.

RateCity.com.au analysis of spending forecasts shows Australians are set to fork out $1,163,194 per minute over the four-day Black Friday to Cyber Monday weekend. This is based on research from the Australian Retailers Association and Roy Morgan forecasts, which has total spending at an estimated $6.7 billion – an increase of 5.5 per cent on the 2023 figures. 

While the Black Friday sales can be a good time to stock up on the things they already need, at a discount, it can also be a time when people fall into a debt trap by buying things on credit they can’t afford to repay.

A RateCity.com.au survey of over 3,000 Australians found, of those who took part in the sales last year:

• 58% took advantage of the sales to buy Christmas gifts or other gifts while they were on sale
• 31% set a budget and stuck to it
• 25% bought something they didn’t need because it was on sale
• 12% bought something on impulse and regretted it later.

 (Respondents could tick more than one option)

More than half of the respondents (54%) also admitted they would buy something they see on special, without shopping around, unless it was a ‘big ticket item’.

Potential cost of putting Black Friday purchases on credit

The RateCity.com.au survey also found 42 per cent of Australians plan to shop in this year’s Black Friday sales, and of those people:

• 49% plan to pay for the majority of purchases using their own money (debit or cash), while
• 45% plan to pay using credit (card or buy now, pay later service).
• 6% plan to redeem purchases using rewards points or gift cards. 

Australians planning to use credit this sales period should be certain they can pay it off before getting hit with fees and charges.

Shoppers tapping their credit cards, which offer up to 55 days interest free, will need to clear this debt between 12 January and 23 January, depending on their billing cycle. This also assumes they do not already have a debt on their card.

People who are unable to clear their credit card bill in time are likely to be up for interest charges.

RateCity.com.au research shows if someone put $2,000 worth of Black Friday shopping on their credit card, and paid just $100 a month to clear this debt, it would cost them $309 in interest and take them just under 2 years to repay this money in full. This does not include annual fees.

If a customer pays just the minimum required, at 2 per cent, it would take them just under 20 years to pay off, with over $4,000, in interest charges. 

Potential impact of putting $2000 on a credit card

Based on the average credit card interest rate of 18.24%

Source: RateCity.com.au. Note: does not include credit card annual fees. Minimum is set at 2% of debt owing or $20, whichever is higher. Assumes cardholder has 50 days interest free at time of purchase.

RateCity.com.au money editor, Laine Gordon, said: “The Black Friday sales can be a great way to stock up on the essentials at a discount, but sales like this are designed to get you spending, so make sure you have your wits about you.”

“These events typically have a deadline on them to encourage people to buy on impulse, potentially without thinking through the purchase or doing a price check,” she said. 

“RateCity research revealed a quarter of shoppers bought something in the Black Friday sales last year that they did not need, just because it was on sale, while one in 10 bought something on impulse and later regretted it. 

“This year’s sales come after years spent battling a cost-of-living crisis and record high interest rates, and people should be careful not to get carried away. 

“A whopping 42 per cent of Australian adults plan to hit the sales this weekend, and nearly half of them will pay for the majority of their purchases on credit.

“Take a few minutes to read the returns policy before you click to buy. A spur of the moment purchase or two on credit could force some shoppers onto a debt treadmill that runs well past this silly season.

“That said, savvy shoppers who take time to plan out what they need, compare prices and stick to their spending limits could come out the other side with their Christmas list ticked off and their budget intact,” she said.

RateCity.com.au tips for shoppers:

• Write out a list: If you’re shopping for Christmas, know who you’re buying for and what they might want. A list will help you stay focused.
• Set yourself a budget: Make sure it’s one you can afford. The last thing you want is to head into Christmas with no money in the tank.
• Don’t submit to the time pressure:  Sales have a time limit on them for a reason. Before you hit ‘buy now’, take a moment to make sure you want and can afford what you are buying. 
• Compare prices across several shops: Don’t just buy something because it’s on sale at one shop – jump online and check the price on other websites. Some stores price match or even go lower.
• Phone a friend: if you aren’t sure whether a big purchase is a good idea, pick up the phone and ask a friend. Sometimes just talking through it can make you realise the purchase isn’t a practical one.
• Be careful of scams: If a deal sounds too good to be true, it might not be legitimate. Be careful to only shop online at stores you know and trust. 

Compare credit cards