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Think twice before overspending at the Boxing Day sales

Think twice before overspending at the Boxing Day sales

26 Dec, 2020 - 4 min read

Beware of the Boxing Day binge this sale season

Consumer advocate RateCity.com.au is warning Australians to keep track of their spending in the post-Christmas sales, with the national total expected to hit $19.5 billion, according to the Australian Retailers Association.

Last month’s ASIC report into the buy now, pay later sector found shoppers could get into trouble when using interest-free platforms such as Afterpay.

The report found in a 12-month period, 20 per cent of users went without essentials as a result of overspending using these platforms, while 15 per cent had to take out other loans to make ends meet.

RateCity.com.au research director Sally Tindall said this year’s Boxing Day sales would be unlike any other with more people opting to hit the shops from the comfort and safety of their own homes.

“If you’re planning to hit the sales online, keep a tally of what you spend. Lugging around shopping bags might be a pain but they’re a pretty good reminder of how much you’ve bought,” she said.

“It’s much easier to lose track of your shopping online. It only takes a few clicks to get yourself into hot water.

“Buy now, pay later platforms such as Afterpay might be interest-free, but they’ve still got the capacity to cause havoc on your finances if you end up overspending.

“If you’re putting your purchases on a credit card, make sure you can pay the total in full when your next bill comes in.

“The last thing you want is to start 2021 shackled in debt,” she said.

Tips if you are planning to use a credit card or a buy now pay later service in the sales:

Give yourself a strict spending limit before you hit the sales.
Don’t impulse buy. Delay any big-ticket items for at least 24 hours.
Make sure you have enough money to pay your debt back before you get stung with fees or interest.
If you’ve overspent, don’t be afraid to return some of your shopping.

Common buy now, pay later traps:

Impulse buying – buy now, pay later platforms often encourage customers to keep shopping. Try and stick to buying things you actually need.
Falling into overdraft – repayments on Afterpay are automatic, which means if you don’t have enough money in your account you could end up going into overdraft with your bank.
Running out of money at the end of the month – ASIC found over a 12 mth period, 20 per cent of users didn’t have enough money to pay for essential items because they overspent.
Using more than one platform at once – ASIC found people getting themselves in trouble were often using multiple forms of credit at once.

Common credit card traps:

Not paying your balance in full every month – if you don’t pay your entire bill, you’ll lose your interest-free days and get hit with interest charges.
Spending more to get points – if you’re spending more just to earn rewards points then your credit card might have gotten the better of you.
Paying just the minimum – you could end up on a debt treadmill and have to fork out hundreds in interest.
Using your entire credit limit – just because the bank has approved you for $10,000, doesn’t mean you should spend that much.

Afterpay vs average credit card

Product	Where you can use it	Free period (before interest or late fees)	Interest rate	Minimum repayments	Annual fees	Late fees	Credit limit
Afterpay	Affiliated retailers only	up to 57 days	None	4 payments over 6-8 wks	None	Max fee 25% per purchase or $68 whichever is lower.	up to $2,000
Average credit card	Anywhere Visa or Mastercard is accepted.	up to 52 days. If you have a balance owing, interest applies from day 1.	16.40%	2.40%	$109	$19.50 a month	$10K

Source: RateCity.com.au. The average credit card is based on the averages of each category in the RateCity.com.au credit card database.

Note: The Boxing Day spend forecast is based on combined research from the Australian Retailers Association and Roy Morgan.

Disclaimer

This article is over two years old, last updated on December 26, 2020. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent credit cards articles.

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This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

Liz Seatter

Senior Finance Writer

Previously a Senior Finance Writer with RateCity, Liz Seatter is an experienced journalist and producer with expertise across the wide media landscape. Her background has seen her covering finance, property, economics, current affairs, and world news since 2004, starting at Newstalk ZB radio in New Zealand, before migrating to Australia. For over a decade Liz has worked for some of Australia's biggest mastheads, including Sky News, Nine News, and heading up Nine’s weekend breakfast show, Today, before landing at RateCity.