More than one-quarter of Aussies expect to accumulate debt these holidays

New Canstar research shows a worrying trend of Aussies increasing their credit card limit to cater for more spending this Christmas, with more than one-quarter of Aussies expect to accumulate debt these holidays.

More than one-quarter of Australian adults expect to accumulate debt following the holiday season this year, according to new Canstar research.

A new Canstar survey of 3,199 Australians found that 28% of people expect to accumulate an average of $825 in debt these holidays, with the majority of this being caused by spending on presents, followed by everyday essentials like housing, insurances, bills, food and clothing. Rounding out the top three areas accumulating debt was Christmas food specifically.

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Just over half (55%) of those expecting to accumulate debt these holidays have a credit card and while 8% don’t have any existing debt on their credit card, the vast majority (92%) do. When asked how close they are to the limit on their credit card, one-quarter (25%) said they were at their limit already.

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Close to one-quarter (24%) of Aussies with a credit card who expect to add to their debt levels this holiday season have increased the limit on their credit card to cater for more spending.

Aussies warned not to overspend these holidays

Canstar’s finance expert, Steve Mickenbecker warns Aussies about credit card spending.

“Christmas is a time for family and celebration, but this time of year can also add to a family’s financial stress if they spend money they don’t have,” says Mickenbecker.

“Credit cards remain the largest source of personal debt and the amount accruing interest grew to $17.4 billion at the end of October, which is up by $516 million over the year. Considering the inflation rate started the year at 7.8 percent, the almost 3 percent increase in debt is modest.

“Australians have kept a lid on debt in recent years, but it’s being blown off this Christmas by more than a quarter of Aussies who are adding festive spending on top of their regular bills to the tab.

“Just as well Christmas comes but once a year, as it’s the time when many of us are not prepared to give up on our celebrations even if we can’t afford them. This year, the hangover for some will last longer than usual as the blow-out from the cost of household essential spending will make it tougher to pay off debt.

“You’ve got to be perplexed by the quarter of people adding to their debt who are already at their credit card limit. These days buy now pay later gives another avenue but the potential for it to roll into very high interest rate lending could add significantly to Aussies’ financial pain.

“It’s a tough time of year for exercising restraint, but when the clock ticks over to 2024, people who have added debt should be reviewing the household budget to find a way to clear their debts as soon as they can.

“For anyone who can’t see a clear way out of debt, let your credit card provider know as soon as possible so they may be able to work out a repayment plan. The National Debt Helpline is also a source of support and provides advice and guidance on how to approach clearing debts and getting back on track ”

canstar’s-tips-to-avoid-credit-card-debt-consequences-in-the-new-year" data-renderer-start-pos="5739">Canstar’s tips to avoid credit card debt consequences in the new year

1. Spend within your means and consider a credit card with a 0% introductory interest rate on purchases, which will apply for a limited time, such as the first 12 months, before switching to a higher purchase rate.

2. Avoid using your credit card for more purchases, except in the case of emergencies.

3. Reduce your credit card limit to avoid any additional temptation to spend.

4. Pay the debt with the highest interest rate or the smallest debt first. Close each credit card account when you pay it off.

5. Consider a 0% balance transfer offer for any lingering debt. This will provide a limited period to repay the debt with no interest charged on the existing debt. Keep in mind interest will likely be charged on any new purchases.

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