Budget advisers are bracing for droves of people struggling with credit card debt after a big December spend in Otago and Southland.
Paymark data for December revealed Southern shoppers put $199.4 million on credit cards in December, a 14.2% increase in Otago and a 14% rise in Southland compared with December 2014.
The regional increases were the two biggest in New Zealand.
Anglican Family Care director Nicola Taylor said people stopped visiting budget advisers at the Dunedin social services agency between mid-December and late January.
Because they are away spending, and in late January and early February they will come in their droves and they want us to work miracles.
The sharp increase in credit card spending was expected because most of the people seeking budgeting advice owned several maxed-out credit cards and store cards.
The Christmas marketing campaigns by companies from the start of November was irresponsible.
The disgusting campaigns of smiling parents and children surrounded by consumer goods prompted many people to make impulse purchases.
The advertisements exacerbated vulnerabilities and often made Christmas an unhappy and stressful time for many Dunedin families.
Dunedin Budget Advisory Service assistant manager Andrew Henderson said he was ''surprised to see the steep increase in credit card use in Otago and Southland.
He had hoped fewer people would be using credit cards after changes to the Credit Contracts and Consumer Finance Act last year.
Acode of responsible lending ... puts more onus on the credit providers to make checks so they are not putting people into hardship by providing credit.
The budget service was usually quiet in December and January but busy in February.
Many people seeking advice had blown their budgets with Christmas and holiday spending and by getting their children prepared for another school year.
Debt on credit card and store cards featured heavily among those seeking advice, many paying interest rates of up to 28%.
People should make a purchase using a credit card only if they were confident they could pay the full balance every month, to avoid hefty interest payments.
In general, higher-income cities had higher average credit debt, with Los Altos and Los Gatos having the highest and fourth-highest per capita incomes in the region. Lower-income cities like East Palo Alto and Gilroy, with the lowest and second-lowest per capita incomes, generally have higher average lengths of time to pay off their credit card debts.
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See the infographic below this article for a complete list of cities ranked by credit card debt and the average months it takes to pay off that debt, as well as the correlation between those figures and per capita income.
The study looked at the largest 2,547 cities in the United States, and Silicon Valley cities made up eight of the top 12 cities when ranked by least amount of time to pay their debt off (see above for a chart showing the nationwide rankings).
For a description of the CreditHub studys methodology, click here.
*For purposes of this article, Silicon Valley is defined as Santa Clara County, cities in San Mateo County adjacent to and south of the San Mateo Bridge, and Fremont, Newark and Union City.
Bryce Druzin is economic development reporter at the Silicon Valley Business Journal.
Consumers paid off almost $35 billion of credit card debt in the first quarter of 2015, then racked up another $53.3 billion over the next two quarters, according to CardHub.
If they keep it up, CardHub estimates consumers will end 2015 with a net increase of $68.5 billion in credit card debt, putting us perilously close to a tipping point at which balances become unsustainable and delinquency rates skyrocket, according to the report.
Total credit card debt is expected to pass $900 billion by the end of the year. That will mean the average households debt balance will be over $8,000 and just $400 below the level CardHub says is unsustainable.
CardHub has been conducting its credit card survey since 200,9 when consumers removed $875 million from their debt balance. By 2010, the net result in debt load increased 377%, followed by a 1,820% increase in 2011. After a 22% drop in 2012, the debt load has been climbing ever since.
The almost $11 billion decline in new credit card debt between the second and third quarters is not a sign of consumers improving credit responsibility. Instead, its part of a historical trend where a first-quarter paydown is followed by a spike in debt levels during the second quarter, a more-modest increase during the third quarter, and a relatively massive buildup to end the year.
CardHub noted that charge-offs are down on a year-over-year basis and are close to historical lows. Creditors removed just $6 billion from debtholders balances in the third quarter.
Furthermore, consumers have reverted to pre-downturn bad habits in eight of the last 10 quarters, CardHub found.
As a matter of fact, the new Q3 debt $21.3 billion is the largest third-quarter increase since the financial crisis, CardHub found, and 71% higher than the post-recession average.
Something clearly has to give, and it does not seem to be our spending habits, CardHub wrote.
--- Read How Financially Smart Are Americans? on ThinkAdvisor.
With the holidays comes spending; for some, that can mean the accumulation of credit card debt.
According to a CreditCards.com survey, 20 percent of Americans say they will be in debt forever. And CardHub's 2015 credit card debt study recently found that consumers racked up $21.3 billion in new credit card debt between July and September.
Former Barclays bank executive Nick Clements--who founded MagnifyMoney, an online financial education site for consumers, and has worked and spoken in Chattanooga--came up with a list of tips for consumers who want to avoid credit card traps.
He specifically addressed store credit cards.
After all, it can be tempting when youre at the register and the clerk says, Would you like 10 percent off on todays purchase? All you have to do is sign up for the store card. It only takes a few minutes.
But Clements said that clerks are counting on shoppers spending more with the card.
What they are counting on is whatever you spend that day, youre thinking, This is great. Its a license for me to spend to save, he said.
But to make store cards work for you, planning is important, he said.
Clements used to run a large credit card company, so he knows insider secrets.
In addition to hoping that consumers will spend more, credit card companies generally have to pay a lot of money to retailers to get the store deal. And they have to make it up somehow--usually with high interest rates, regardless of a persons credit score.
The interest rates on store cards are outrageously high, he said.
But it is possible for consumers to make the cards work for them, he said.
For example, he said:
You can get a good deal. I once moved into a new house. I was very tactical: I went shopping on a day with deep in-store discounts ... and I applied for a credit card that had a 10 percent discount for purchases made on the day. Because I knew I would be spending more than $2,000, the savings (more than $200 for the credit card purchase alone) was a great deal. And, most importantly, I paid the balance in full at the end of the month. I had planned my purchase in advance and used the store card offer to save more money. That is the only way to get a good deal.
He also noted that applying for the card means a hard inquiry will hit your credit report and your score. That isnt a major impact in many cases, so he said he doesnt want to scare people.
If you know you arent going to buy or refinance a home within the next year or so, the inquiry shouldnt be too big of a problem, he said.
Click here to see the rest of Clements tips to avoid credit card pitfalls.