Sydney, 4 December, 2006: The Australian Bankers’ Association (ABA) says that in the lead up to Christmas it is always sensible to give consideration to your financial situation and understand that any increased balances on your credit card will either need to be repaid or will accumulate. Completing a budget and understanding your financial situation is an important step in having a good Christmas.
Reserve Bank data shows that most consumers manage their Christmas spending very effectively. Aggregate data shows that in past three Christmas periods, customers have repaid 99.6% or more of the total value of their spending by:
- strong increases in customer repayment activity in December; and
- customers’ repayments considerably outstripping spending in January.
However, this is aggregated data; households still need to manage their own specific budgets.
David Bell, Chief Executive of the ABA, said: “The ABA, with Good Shepherd Youth and Family Service, has produced a booklet – Smarter Money – Take control and stay on top of your finances – in which there is a section where you can fill in your income and expenses to calculate your disposable income.”
“When taking on more debt, always give some thought to how you would manage if your income was interrupted for a while or if you lost your job. Unforeseen change in personal circumstances such as unemployment, illness and family break-up are the major causes of financial difficulties with repaying card debt.”
Reserve Bank data analysed by the ABA shows that most credit card holders plan to spend at Christmas but also plan to pay back debt in December and January – the month which transactions fall markedly.
The key facts from the RBA data shows:
- For the last Christmas period (December 2005/January 2006), customers repaid more than they spent. Repayments exceeded transactions by $638 million.
- The seasonality of credit card spending and repayment is evident in the Reserve Bank data. There is a large increase in new spending in December accompanied by a large fall in spending in January. On the other hand, repayments rise significantly in December and are considerably higher than new spending in January. (See below Chart 2)
Smarter Money – Take control and stay on top of your finances can be found on our website – www.bankers.asn.au or free call us on 1800 009 180 and we will mail you a copy.