Two of the biggest shopping days of the year are right around the corner, Black Friday and Cyber Monday, when consumers flood the streets, malls, shops and online retail avenues to capture some of the biggest deals in the lead-up to the holiday season.
However, according to financial experts, not only should shoppers be keeping an eye on their spending – Vancouverites in particular, who currently hold an average of $41,077 in consumer debt – but they should also be careful about how they’re spending.
Blake Elyea, Senior VP and licensed trustee with Grant Thornton’s consumer insolvency team, one of the world’s leading accounting firms providing assurance, tax and advisory services, is warning consumers that charging Black Friday and Cyber Monday deals to credit can lead to long-term financial effects if not carefully budgeted. Effects that, if accumulated over time, can also lead individuals to become financially insolvent.
According to Elyea, “In today’s age, people are charging to credit like never before and therefore, without the physical act of seeing and handling cash, it can be easy to let the spending get the better of you. While you might be getting a great deal this Black Friday or Cyber Monday, if you’re charging items to a credit card, these deals have the potential to end up costing you much more than the original price tag.”
He points out the new iPhone 6 as an example, which can retail at a cost of $859.00. If a consumer charges the item to their credit card and is only able to make minimum payments to the purchase, at a 17 per cent interest rate, that same iPhone will end up costing more than $300 additional in interest and will take about two years to pay off.
Elyea goes on to say that being able to establish from need versus want can be the difference between spending beyond one’s means on Black Friday and Cyber Monday. He also offers some additional tips to overcome racking up credit during this year’s shopping holidays:
- Do your homework. Find the best possible deals and make a list of the items you intend to purchase. Do not purchase anything outside of this list.
- Determine your budget before embarking on Black Friday or Cyber Monday shopping. Once you spend your budgeted amount, do not purchase anything else.
- Whenever possible, spend using debit or cash – or if shopping online, set up a PayPal account where offered and make purchases using that instead of your credit card.
However, should the spending get the better of you this Black Friday, Cyber Monday and holiday season, Elyea encourages individuals to act on any unmanageable debt sooner than later.
“Putting off dealing with debt – missing payments, living paycheck to paycheck, transferring money around to deal with debts – can lead the problem to get worse and worse and snowball out of control. Taking the first step to seek out help can be the hardest step towards a fresh financial start. But by calling a licensed trustee you can get free financial advice or help with filing a consumer proposal which can reduce consumer debt by up to 75 percent.”
Below are some of the top predicted items to be purchased on Black Friday and Cyber Monday, and the true cost of each item if charged to credit and only making the minimum payments:
Beats by Dr. Dre – Beats Studio Over-Ear Sound Isolating Headphones
- Retails for $269.99 ($33 dollar savings over Black Friday, Cyber Monday)
- Total cost if charged by credit / minimum payments made (17% APR): $294.99
iPad Air 2, 128 GB
- Retails for $849.99 ($50 savings over Black Friday, Cyber Monday)
- Total cost if charged by credit / minimum payments made (17% APR): $1,166.99
Canon EOS 70D 20.2 MP Digital SLR Camera
- Retails for $1,449.00
- Total cost if charged by credit / minimum payments made (17% APR): $2,347.00
Xbox One 500GB Console with Kinect
- Retails for $499.99
- Total cost if charged by credit / minimum payments made (17% APR): $591.99
- Retails for $1699.99
- Total cost if charged by credit / minimum payments made (17% APR): $2,777.99
Feature Image: Shopping via Shutterstock