Deep in holiday debt? How to start repaying overdue credit and buy now, pay later bills

Christmas lunch is over, all the presents are unwrapped. Now comes the hard part: paying for it all.

If you’re in that position, you’re not alone. Personal credit and charge-card balances racking up interest hit a four-year high^[1] of A$18.4 billion in September this year – even before the Black Friday and Christmas sales.

Last year, a survey^[2] for the Australian Securities and Investments Commission (ASIC) found almost half of Australian adults with debt had struggled to make repayments in the past 12 months.

That same survey for ASIC found Millennials aged in their late 20s to early 40s were the generation most likely to experience financial hardship. Yet most were unaware^[3] of their right to apply for hardship^[4] help through their lender.

Especially at this time of year, it’s easy to rack up big bills on credit cards or buy now, pay later payments. Here’s what you need to know about starting to repay those common debts, especially if you have more than one loan.

Watch the interest on your credit card

Over recent years, credit has overtaken cash^[5] to be the second most popular way^[6] to buy things in Australia, behind only debit cards, which tend to have lower checkout fees.

If you’re able to repay the full balance each month, buying on credit is not necessarily a problem.

But more than one in three (36%) of Australians have unpaid credit card bills accruing interest, according to a Roy Morgan survey^[7] of more than 22,000 credit card holders published in November. That survey found the median amount owed with interest was $1,037. People paying off mortgages tended to owe more: $1,342.

According to Reserve Bank of Australia^[8], average interest rates on credit cards at the end of October were up to 20.99% a year. In contrast, low-rate cards charge 13.49% per year. That’s a big difference. So choosing the right card can save you a lot in interest repayments.

One of the ways people often get into trouble is by not reading and understanding the product disclosure statement^[9], which sets out the credit terms, then finding their credit use is stretching their budget too far.

The rise of buy now, pay later

Buy now, pay later^[10] lets you buy a product immediately, while delaying the repayments – sometimes over just a few weeks, but potentially over longer periods.

Almost a third^[11] of Australians were already using it by mid-2023.

But overseas research suggests^[12] people who use buy-now, pay-later services – especially, younger shoppers and those with lower incomes – end up spending more online than those who don’t.

Read more: Research suggests those who use buy-now-pay-later services end up spending more^[13]

How to start reining in your debts

Don’t beat yourself up over your holiday spending. Anxiety, shame and feelings of failure can stop people getting help^[14]. So forgive yourself – then start taking control^[15] of your money.

Contact your bank or lender’s financial hardship team^[16] to get out of high interest loans as soon as possible. Under the law, lenders have to respond to your request for help.

Switch to a zero or low-rate card, or refinance with a lower cost personal bank loan. Then look at negotiating a suitable payment plan with the loan provider based on your income and what you have available after necessary expenses.

While paying off your debt, actively visit comparison websites and compare credit card interest rates and offers. Sometimes credit card companies offer interest-free periods if you refinance your existing credit card balance with them.

The 2024 ASIC survey found^[17] many Australians are so reluctant to apply for financial hardship assistance that they would rather sell belongings (42%) or get a second job (40%) first. Don’t avoid seeking assistance – but both of those ideas may help too.

To lighten your debt burden, sell or return any unwanted gifts or unused items.

Read more: Can you return gifts without a receipt or packaging? A legal expert explains^[18]

If you feel comfortable, you can also ask your employer for extra paid hours, or to sell back some of your annual leave.

If it’s not a conflict with your main job, consider taking on a second job outside work, such as weekend, night or public holiday shifts to take advantage of penalty or overtime rates^[19].

Talk to family and friends. Whether you ask for money or not – and that can be tricky for everyone – don’t keep your debts a secret.

Where to get more help

Free, confidential financial or personal support is available from:

Disclaimer: This article provides general information only and is not intended as financial advice.

References

1. ^{^} a four-year high (www.abc.net.au)
2. ^{^} survey (www.asic.gov.au)
3. ^{^} most were unaware (download.asic.gov.au)
4. ^{^} apply for hardship (moneysmart.gov.au)
5. ^{^} credit has overtaken cash (theconversation.com)
6. ^{^} second most popular way (www.rba.gov.au)
7. ^{^} Roy Morgan survey (www.roymorgan.com)
8. ^{^} Reserve Bank of Australia (www.rba.gov.au)
9. ^{^} product disclosure statement (moneysmart.gov.au)
10. ^{^} Buy now, pay later (moneysmart.gov.au)
11. ^{^} Almost a third (static1.squarespace.com)
12. ^{^} overseas research suggests (theconversation.com)
13. ^{^} Research suggests those who use buy-now-pay-later services end up spending more (theconversation.com)
14. ^{^} stop people getting help (download.asic.gov.au)
15. ^{^} taking control (moneysmart.gov.au)
16. ^{^} financial hardship team (moneysmart.gov.au)
17. ^{^} found (www.asic.gov.au)
18. ^{^} Can you return gifts without a receipt or packaging? A legal expert explains (theconversation.com)
19. ^{^} penalty or overtime rates (www.fairwork.gov.au)