11 Dec The Cost of Buying Christmas Presents on Credit

“I’ll put it on plastic,” you think, tapping your credit card, “How bad could it be?” Buying Christmas gifts on credit can lead to various problems, such as uncontrolled spending, financial stress, over-indebtedness, and a bad credit score. Sometimes, credit and store cards can feel like an unlimited source of cash, leading us to spend credit on presents like it’s water. Overspending on people we love is too easy; we want them to have the best of the best and pay it off over the following months.

Let’s discuss the true cost of buying Christmas presents on credit: what happens to gifts after we buy them, an example of the debt Christmas gifts on credit can cause, and how to get out of unmanageable debt. Debt help is here, make use of it!

The True Price of Buying Christmas Gifts on Credit

The debt we create by buying gifts on credit can become unmanageable when combined with other debt, such as personal loans, mortgages, student loan debt, and car repayments. In turn, you might feel anxious about how you’ll pay the debt, especially if your income hasn’t risen to meet the cost of living. Moreover, your credit score can drop if you’re unable to repay your debt, limiting your future credit facility opportunities.

Is buying Christmas gifts on credit worth it? What becomes of the gifts’ futures?

What Happens to the Gifts We Buy?

Many companies design the products we buy with obsolescence – short lifespans – in mind. This means that the products we buy are designed to break or become obsolete in a short time. Think of how over the years, your phones’ lifespans have increasingly degraded as new models come out. Manufacturers and brands achieve this by using lower-quality materials, limiting software updates, and introducing new models with superficial changes. Consider how clothing trends change so quickly, or how there’s a new phone and computer model every few months.

Product obsolescence leads to people discarding the gifts we spend our hard-earned money quickly because they’ve broken or have become redundant in the wake of a new trend. It’s better to spend money on small, heartfelt gifts. As the saying goes, it’s the thought that counts.

Example of Debt from Christmas Gifts on Credit

This is an example of the real cost of buying R5,000 worth of Christmas gifts on credit.

Anna wants to buy Christmas gifts for her mother, father, and boyfriend. She decides to take out a personal loan of R5,000 with a subprime credit score of 580. This means she’ll likely be subject to higher interest rates (20%) and a shorter repayment term (12 months).

Let’s say she spends R1,500 on Cotton On clothes for her mother, R2,000 on video games and clothes for her father, and R1,500 on gym clothes and equipment for her boyfriend.

An R5,000 loan with an APR (interest) of 20% repaid over 12 month’s total cost would be R7128. She would pay R2,128 in interest.

How to Get Out of Unmanageable Debt

If you feel stuck in debt with no way out, True North Debt can help. We’re a debt management and clearance company that specialises in reducing interest rates and repayments, protecting your assets from repossession, ensuring you’re immune to legal action, and helping you with financial planning. To find out more, contact True North Debt, your partner in financial freedom.