Sale season starts tomorrow - why one click too many could kill your Christmas

Shoppers planning to spend big in the Click Frenzy sale tomorrow are being warned to plan ahead and stick to a tight budget to avoid getting into trouble in the lead up to Christmas.

While the sale season can be an opportune time to buy Christmas presents at a discount, people buying these purchases on a credit card, or via a buy now, pay later service should make sure they have enough money to clear this debt in full before getting hit with interest charges or late fees.

RBA credit card statistics show over the last two years, credit card debt accruing interest rose each month from November to February inclusive. Last year, debt accruing interest rose by a total of $868 million from the end of October 2022 to the end of February 2023.

If I shop in the Click Frenzy sales, when do I need to clear my debt by?

Credit cards: for purchases made tomorrow on a credit card with ‘up to’ 55 days interest free, shoppers will need to clear this debt potentially as soon as mid-November, and as late as mid-December to avoid interest charges. The exact day will depend on where they are in their credit card billing cycle. However, if they already have debt accruing interest on their card, they are likely to be charged from day 1. The average interest rate on RateCity.com.au is 16.99 per cent, while the highest is 25.80 per cent.

Buy now, pay later: For services offering 4 fortnightly instalments, where the first payment is made on the day of purchase, shoppers need to make sure they have enough funds to clear their debt each fortnight up to, and including, December 5. Late fees for popular service Afterpay is $10 per missed instalment, and $7 if not paid within 7 days (capped at 25 per cent of the purchase price).

Whatever you do, don’t pay the minimum amount listed on your credit card statement

Credit card companies never ask you to clear your debt in full within a short time frame. They typically require a minimum repayment of 2 – 3 percent of the balance owing, or $20 - $25. Whichever is higher.

RateCity.com.au research shows if someone put $2,000 of debt on their card during the sale season, at the average interest rate of 16.99 per cent, and a 2 per cent minimum monthly repayment, it would take 17 years and 2 months to pay their debt.

Time taken to pay off a credit card debt of $2,000

At average interest rate of 16.99% and 2% minimum repayments

Source: RateCity.com.au. Note: assumes minimum repayments are 2% or $20, whichever is higher. Does not include annual fees.

RateCity.com.au research director, Sally Tindall, said: “The pre-Christmas sales can be a great time to stock up on presents and everyday essentials at discounted prices.”

“However, for those on a tight budget, shopping in the Click Frenzy sales can go awry if you don’t have your wits about you,” she said.

“Write out a list of what you need and set yourself a strict budget. If it’s not on the list and not in the budget, don’t buy it.

“If you don’t have the money to pay for something, try and resist the temptation to nab a bargain while the clock is ticking. There’s plenty more sales to come in the silly season, so save up and try again later.

“If you do put your shopping on your credit card or buy now, pay later account, come up with an iron-clad plan to pay this money back, in full, before the due date.

“Our research shows that if someone with a relatively modest $2,000 credit card debt, paid the minimum amount of 2 per cent, it would take them 17 years and 2 months to pay that money back. That could mean your silly season shopping keeps repeating on you until the end of 2040.

“When you get your next credit card statement, ignore the minimum payment amount and look for the total balance owing. That’s what you need to pay, in full, as quickly as you can,” 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.

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