Australians need to reign in debt after spending too much at Christmas

One quarter of Australians say they spent too much money during the Christmas period and 7% expect to miss a bill payment as a result, according to a new survey.

One quarter of Australians say they spent too much money during the Christmas period and 7% expect to miss a bill payment as a result, according to a new survey.

The Dun & Bradstreet national consumer credit expectations survey also shows that 18% of Australians plan to apply for new credit, while 17% expect to use credit cards for bills they otherwise could not afford.

The survey also reveals that 5% of households anticipate missing a bill payment in the next few months, and 19% of households expect debt to increase over the coming months.

The figures highlight large differences between young and old, and low-income and high-income households.

The survey shows 25% of households earning above $70,000 expect to apply for additional credit in the coming months. That figure drops to 17% for households earning $30,000 to $70,000. Only 7% of households earning below $30,000 expect to apply for new credit.

Dun & Bradstreet chief executive Christine Christian says the global financial crisis is causing a larger gap between low and high-income earners.

“The differences between the haves and have-nots are evident in the credit and debt expectations of Australian families,” she says.

“The survey shows that high income families and young people are comfortable taking on new debt, despite tougher economic conditions and more stringent lending standards. The same demographics are also seeking to rein in their debt, which is a positive sign amidst these tough economic conditions.”

Additionally, 30% of low income households expect higher debt levels in the next few months while just 16% of high income households anticipate more debt.

But despite the differences over debt payments, 23% to 24% of households in each income bracket are concerned about Christmas spending. And while 4% of high income households say they will struggle to pay Christmas bills, the number jumps to 12% for low income earners.

The survey also reveals that Generation-Y may have learnt its lesson – 27% of 18 to 34 year olds expect to lower their debt levels by the end of March, with only 12% of young people expecting to increase their debt. That number jumps to 24% for older Australians.

But Christian nevertheless warns younger Australians to stay away from excessive debt.

“Younger Australians need to be careful with their use of credit to avoid their debts spiralling out of control. Paying bills with credit can be an early indicator of debt stress, and in an environment where banks are only willing to lend to those without adverse data on their credit file, consumers need to be particularly stringent with their financial affairs.”

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