Beware credit hangover

Photo: MNP

Canadians plan to spend 17 per cent more this Christmas than last, according to a national holiday shopping survey.

The Accenture survey found shoppers plan to spend an average of $873, compared to $744 last year.

But a Kelowna insolvency trustee says many people will go over budget.

“Many people go into the holidays having a budget, believing they can stick to it, but the costs of gifts, decor and food and drinks can end up being far more than expected. Putting the balance on credit seems like an easy solution at the time, but it can really blow the holiday budget,” warns Darrin Surminsky of MNP Debt.

The Royal Bank 2016 post-holiday spending poll revealed 41 per cent of respondents overspent, putting themselves an average of $397 deeper into debt.

Last-minute hostess gifts, guilt gifts for neighbours who drop by, even unexpected shipping and postage costs can get shoppers into trouble.

“Unexpected expenses can quickly send even a carefully calculated budget into a tailspin. No one wants to feel like the Grinch, so many end up relying on credit cards, even though they may be unable to pay off the bill in January," says Surminsky.

And accrued interest on credit cards compounds the problem.

“People might think they got a really good deal on Black Friday or Boxing Day but overspending on credit during the holidays means paying high interest rates every month afterwards. Those ‘perfect’ gifts suddenly end up costing a lot more than expected."

If that average spend of $873 is left on a credit card for 90 days, it would actually cost $902.25. If left for six months, $924.60. And an entire year of making minimum payments would cost a grand total of $970.44. 

Surminsky advises shopping early instead of last minute, and using cash to stay within budget.