Christmas credit is new year pain: warning
New Zealand households are being given a warning: Take care with any offers of finance that appear in your letterbox this Christmas.
Peter Cordtz, head of community programmes at the Commission for Financial Capability, said there had been a worrying increase in the number of mail drops being done by well-known brands wanting to market ‘‘pay later’’ debt to families.
Q Card, Farmers Finance Card and Gem Card are among those offering interest-free periods of about three months, often with no interim payments required.
But once the term is over, the cards have interest rates of about 25 per cent. That is significantly higher than a standard credit card rate of 17 per cent to 21 per cent.
Cordtz said the finance deals were being promoted by big-name retailers often used by New Zealand households buying entertaining supplies at Christmas.
‘‘These retailers are dressing up danger as opportunity. In three months’ time those families would have had to fork out for back-to-school costs, and still be faced with paying off Christmas dinner.’’ The commission’s research showed that a quarter of New Zealanders felt pressure from their family or community to spend more at Christmas than they wanted to.
Among those who identified as ‘‘sinking badly’’ financially, 32 per cent felt pressure to spend more than they wanted to. Younger people aged 18 to 34, Ma¯ ori and Pasifika were also particularly vulnerable.
Tim Barnett, chief executive of FinCap, said household debt was a growing problem.
‘‘We also know that digital media uses personal data in ways unthought of to get irresistible messages to consumers,’’ he said.
‘‘We see the signs of ever more intense marketing this season, and join others in warning consumers to think so carefully before entering into credit and similar arrangements, including ‘access now, pay later’ arrangements.’’
He said the Government needed to ensure, in its reforms of credit law, that it was offering real solutions for consumers.