Christmas credit may cause debt referrals to double

Wednesday 16th December 2009

Christmas spending on credit will take its toll on consumers in the New Year, with many people unable to pay back money spent over the holiday period, and debt referrals traditionally doubling in February, according to Dun & Bradstreet.

Debt referrals in February traditionally surge almost 94% in February as people struggle to repay credit card bills racked up over the Christmas period, according to the debt collection company. It warns this year could be worse than normal with mounting pressures placed on families from the country’s deepest recession in 28 years, which pushed up unemployment to its highest level since 2000.

“Some households are facing financial difficulties as a result of the credit crisis and because they may be facing Christmas with less money than last year we could see an increase in unaffordable credit related spending,” said New Zealand general manager John Scott in a statement. “Each year we see too many consumers spend beyond their means over the holidays, only to result in unnecessary costs and pain the following year.”

The Christmas period will be an important one for retailers, which were the only sector to register an increase in confidence in the last National Bank Business Outlook survey, while consumers remain subdued about the current state of the economy and don’t expect to purchase big ticket items until things pick up in 2010. Retailers bore the brunt of the global financial crisis as New Zealanders were forced to cut back on their spending and repay mounting debt.

Consumers have been reaching into their wallets into the lead-up to Christmas, with the latest data from Paymark showing a 6.7% increase in the number of electronic transactions in the first 13 days of December.

Paymark’s systems account for about three-quarters of all eftpos transactions in New Zealand. Paymark chief executive Simon Tong said the pick-up in spending is consistent with trading trend over the past few years, and he expects traditional trading patterns in the lead-up to Christmas.

Businesswire.co.nz

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