Shoppers warned to stay on track this Black Friday

Shoppers planning to hit the Black Friday sales should create both a list of things they need, and a water-tight budget, to avoid overspending or getting caught up in unnecessary debt.

The Black Friday-Cyber Monday sales, which are expected to see shoppers spend $6.36 billion, according to the Australian Retailers’ Association and Roy Morgan, can be a good time for people to stock up on things they 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:

• 49% took advantage of the sales to purchase Christmas gifts, or other gifts, while at reduced prices.
• 32% approached the sales with a set budget and stuck to it.
• 24% bought something they did not need, just because it was on sale.
• 17% admitted they over stretched their budget.
• 15% bought items on a credit card or buy now, pay later (BNPL) service that ended up costing them in late fees and/or charges.
• Note: respondents could tick more than one option.

The potential cost of putting Black Friday purchases on credit

Anyone planning to use credit to cover costs, should be 100% sure they can pay it off before getting hit with fees and charges.

BNPL

Many BNPL platforms are interest-free and fee-free – until you miss a repayment.

Black Friday shoppers putting purchases on Afterpay will be paying this money back up to 5 January 2024. This assumes they pay the first instalment at the checkout.

If they miss a payment, late fees are charged at $10 per missed instalment, and up to $7 if not paid within 7 days (capped at 25 per cent of the purchase price).

If a customer misses all three repayments their interest charges could climb as high as $51 per purchase. Across multiple purchases this could run into the hundreds of dollars.

Typical credit card

Black Friday shoppers putting purchases on a credit card, which offers ‘up to’ 55 days interest free, will need to clear this debt between 19 December and 18 January, depending on their billing cycle. This also assumes they do not already have a debt on their card.

Shoppers that can’t 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 $302 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 17 years to pay off, with over $3,000, in interest charges.

Potential impact of putting $2000 on a credit card

Based on the average credit card interest rate of 17.01%

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 person has 40 days interest free at time of purchase.

Be on high alert for scams

Australians are also encouraged to stay vigilant as scammers increasingly use fake online stores to swindle millions of dollars from unsuspecting shoppers.

Data from the ACCC reveals that so far in 2023 (January – October inclusive), Australians lost $6.69 million in online shopping scams.

Last year November recorded the biggest loss when it comes to online shopping scams.

Amount lost in online shopping scams - 2022

Source: ACCC Scamwatch

RateCity.com.au research director, Sally Tindall, said: “Black Friday can be a great way to stock up on essentials at a discount, but these sales are designed to get you spending, so make sure you have your wits about you.”

“Write out a list and a budget before you hit the shops, whether that’s in store or online,” she said.

“Most families’ budgets are a lot tighter than they were this time a year ago. Recognise this and revisit your shopping list to see where you can pare it back.

“If you can get want you need at a discount, without breaking the budget, then you might end up saving money, but if you go off script it could be in for trouble.

“One moment you’re scrolling through your emails, the next you’re hitting the ‘buy now’ button on a breadmaker you don’t need and can’t afford, even at 40 per cent off.

“RateCity research shows that 24 per cent of Black Friday shoppers last year bought something they did not need, just because it was on sale.

“Make sure your read the terms and conditions before you purchase an item, because if you make a mistake, or have any regrets, you can then send it back.

“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.

“If you’re shopping online be on the alert for fake stores. You might have had all year to plan out your Black Friday purchases but remember, scammers have too.

“Look for the store you want via an independent link, rather than one you’ve been served up on social media and read reviews beyond those posted on the actual site.

“Incorrect spelling, an unusual URL or poor formatting can also be clues the website you’re buying from isn’t legit.

“If a deal looks too good to be true, it probably is. No sale is worth handing over your cash, and your information, to scammers,” 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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