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Spend wisely to avoid debt in the Black Friday & Cyber Monday sales

Spend wisely to avoid debt in the Black Friday & Cyber Monday sales

The upcoming Black Friday and Cyber Monday sales are set to attract a high number of Aussie shoppers looking to snap up a bargain for Christmastime. But buyer beware: it’s still easier than ever to accumulate debt if you’re not careful.

New survey research from ING shows that more than half of respondents (64%) are more likely to take advantage of the sales this year, compared to previous years.

The impact of pandemic restrictions and lockdowns has forced millions of Aussies to bypass spending on the typical family holiday, as well as eating out and entertainment costs.

So, it’s unsurprising that many Aussies are looking to spend big in the next few weeks, as Commonwealth Bank economist, Gareth Aird, recently proposed households will be sitting on a staggering $230 billion in accumulated savings by the end of the year.

In fact, ING research suggests the impacts of the pandemic on household finances has led over two in three respondents (69%) to expect larger discounts in the upcoming sales. The survey found that respondents are expecting an average discount of 37%, as one in five respondents (21%) admitted they have grown to “expect more for less” in the past year.

The most popular potential purchases for eager shoppers appear to be:

  • Replenishing wardrobes (49%)
  • Shopping for Christmas gifts (46%)
  • Technology bargains (40%)
  • Travel and accommodation (17%)
  • Experiences (12%)

Head of Daily Banking at ING Australia, George Thompson, said: “The research also shows there’s been a significant shift from in-store Black Friday shopping to online, and it’s great to know shoppers are employing savvy tactics like comparing websites to bag a bargain for Christmas and set themselves up for the year ahead.”

However, would-be shoppers should keep in mind that in the frenzy of Black Friday and Cyber Monday sales and discounts, it can be easy to get swept up and accumulate more debt than you anticipated.

Black Friday and Cyber Monday shoppers using credit cards may want to consider not only how much they plan on spending, but how they will pay off their next bill.

Taking control of your holiday spending

Recent Roy Morgan research, in conjunction with the Australian Retailers Association, has predicted the upcoming Black Friday and Cyber Monday sales to see a record $5.4 billion spent by Aussies in stores and online.

It’s clear there is a strong appetite to spend big in these sales. And with the RBA’s latest national credit card debt accruing interest levels falling to their lowest level in almost 18 years, Aussies will be wise to consider avoiding falling back into bad credit card habits.

So, how can Aussie spenders skip the holiday debt hangover and repay their credit card bills?

  1. Know your interest-free days window. While some cards require you to repay your statement balance in full immediately upon receiving your bill, others provide customers with interest-free days that offer much-needed breathing room. Learn more about interest-free days with our guide.
  2. Know your interest rate. RateCity research recently discovered a shocking 80% of credit card users with debt do not know the interest rate they are paying. To use your credit card wisely, you need to understand your credit card product, including the rate you may be charged on an overdue statement.
  3. Set a spending limit. Now you know your interest-free window and interest rate, set a spending limit for your Black Friday and Cyber Monday purchases you can easily budget for within your statement period.
  4. Look out for pesky fees. There are several foreign transaction fees you may be charged in the Black Friday and Cyber Monday sales, particularly if you’re shopping on overseas websites. If your credit card issuer charges currency conversion fees or other overseas spending fees, consider shopping locally this year (plus it’s great to support Aussie businesses!)
  5. Cut down your debt. Now you’ve made your purchases, you’ll need to get on top of your debt. This may involve you tinkering with your budget to allow more funds to funnel towards your card debt, selling your belongings or even considering a balance transfer card.

Speaking of balance transfer credit cards, if, come January, you’ve found yourself with a serious holiday spending debt hangover, it may be worth considering the pros and cons option.

Balance transfer credit cards allow you to transfer your existing debt to a new card that typically charges 0% interest with a large window (generally 3-6 months, or up to several years).

However, if you fail to pay off your balance within this interest-free window, the card issuer will charge interest on your outstanding debt, generally at a higher rate than average. So, before you commit to this credit card type, be sure to set a careful budget that allows you to repay your debt within the balance transfer period.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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