As the shopping rush reaches peak intensity before the holidays, a local debt expert is warning Ontarians to avoid taking on more debt or payday loans, as they try to cope with the pressures of last minute gifts and Christmas grocery shopping.
“People can be tempted to borrow money from payday lenders or really overextend themselves on credit cards when they’re feeling that mounting pressure right before the holidays. The interest rates on these types of credit are extremely high, and can easily trap someone in a crippling cycle of debt,” says Wesley Cowan, a Kitchener-based Licensed Insolvency Trustee at MNP Ltd.
A recent poll conducted by MNP on behalf of Ipsos highlights some bad financial habits that are exacerbated by the holiday shopping season. Sixteen per cent admit to being lured in by sales on ‘deal’ days like Black Friday or Boxing Day. Nearly one in ten (8%) said they have bought something on credit that requires no payments for a while.
“This time of year, we are constantly bombarded by flashy sales and ‘buy now, pay later’ offers, but they may not be as good of a bargain as you think. Even a small purchase or a Boxing Day door crasher won’t be as good of a deal if you end up carrying the balance on credit,” says Cowan.
Two in ten Ontarians (20%) admit to only paying the minimum balance on their credit card or line of credit (18%). Thirteen per cent say they have made a major purchase on credit without paying it off right away. About the same number (15%) say they borrowed money they can’t afford to pay back quickly. Nearly one in ten (7%) admit they have even used their home-equity line of credit to buy things they want but don’t need.
“If you choose to borrow or use credit cards, then it’s important to understand what true cost of that debt really is. When you see the sticker price of an item you want, calculate the potential interest accrued and add that to the price. It’s likely that item won’t seem like such a steal anymore,” says Cowan.
Come January, Ontarians anticipate feeling the effects of a credit hangover. Last year, almost half (46%) felt anxiety over the arrival of holiday-spending bills, and regret over how much they spent (46%). However, four in ten (44%) said they made it their New Year’s resolution to get their finances back on track.
“Resolve to shop thoughtfully and spend less this holiday season. Don’t wait until the New Year to make changes to your shopping habits. At the end of the day, remember that the holidays are more about your presence than the presents. I also recommend making a plan to tackle your debt repayment obligations right away and seek professional advice if your debts are becoming overwhelming,” advises Cowan.