Aussies urged to kick post-party ‘debt regret’

With spending on party dresses, flashy gifts and holidays at a high this time of year, reliance on Christmas credit for the party season can leave consumers with debt stress in the New Year.

Veda, Asia Pacific’s leading provider of consumer and commercial data intelligence and insights, reports that Aussies who apply for any of type of credit between October and December are more likely to end up with ‘debt regret’, than those who apply at any other time of the year.

New Veda trend research shows that individuals making credit card applications in the December quarter are more likely to have a credit default in the New Year.
 

The five-year trend analysis from Veda shows that for December quarter credit card application enquiries, the rate of default recorded on all forms of debt in the three to nine months after the application enquiry is 3.3%. This represents an 8.5% increase on the average default rate recorded for credit application enquiries made at any other time of year.

Veda’s analysis also shows that over the past five years application enquiries for credit cards alone increased on average 10.3% in the December quarter, compared to the September quarter, each year.

While credit card application enquiries generally peak at the end of the year, there is a sign of weakening demand for credit cards overall. Veda reported a 5.6% drop in credit card application enquiries between January and October 2012, compared to the same period in 2011.

Despite this weaker credit demand, Veda warns against after-Christmas credit ‘debt regret’.

“While consumer credit demand is down and this will impact on spending, long term trends show there’s a heavy reliance on credit cards during this period, so consumers should still be warned against complacency when reaching for the credit card,” according to Veda Marketing Manager Belinda Diprose.

“Many people are more susceptible to defaulting on payments down the track, which has implications for their credit history long after the tinsel has been taken down,” Ms Diprose said.
 

VEDA’S 5 TIPS TO HELP PREVENT CREDIT ‘DEBT REGRET’ THIS CHRISTMAS:

1. Do your homework. With so many credit cards and loan types on offer, it pays to do your research on interest rate deals. Read the fine print and don’t be tempted by clever marketing tactics to sign you up.

2. Make a list and check it twice. Plan where you want to be financially in three months and align your spending to that pool of money available. It takes 10 -15 minutes, but saves you months of regret. To prevent being caught out in the madness of Christmas buying and Boxing Day sales, tally your credit card spending daily and cross check to your budget.

3. Keep a handle on what you owe. Be mindful that debt comes in many forms. Keep sight of the full picture: including money you owe on credit cards, store cards, utility and other regular bills, personal loans and mortgages. Monitoring all forms of debt you’ve signed up to will help keep you grounded in reality.

4. Pay on time and save a packet. Have a designated home for bill-notices that are ordered according to due date, and have a regular pay day each fortnight or month, and don’t miss it. Don’t throw money away in late fees.

5. Know your credit track record Over-extending your credit could result in you defaulting on a loan. This can have long term impacts on your credit worthiness. To obtain a copy of your credit file and to receive alerts for certain changes made to your credit file go to: www.mycreditfile.com.au.This helps you proactively manage your personal credit finance and may reduce the risk of being denied credit in future.