Debt counsellors warn on cost of bounced debit orders and festive season overspending

December may signal the start of the “silly season”, but the National Debt Counsellors’ Association (NDCA) on Wednesday warned this does not mean consumers should make silly decisions with their cash.

The association has seen a spike in consumers seeking debt counselling in January and February due to unwise decisions over the festive period.

“The combined economic impact of successive lockdowns, escalating inflation and interest rate increases have negatively impacted most people’s earnings. In addition, many companies are not in a position to pay an end-of-year bonus,” NDCA chairperson Benay Sager said.

“Then there are the usual contributory factors. Real income continues to decline, having shrunk by 24% over the past five years. And for the perfect storm, factor in that because most people are paid early in December, that pay cheque needs to stretch for up to a month-and-a-half until the end of January.”

January arrives with its own financial pressures, such as purchases of school uniforms and stationery which, if not prepared for, can also put people into debt.

Most people do not change their debit order payment dates, and with payday being earlier than normal some people do not have enough money left in their accounts to cover these.

Sager warned that the consequence of debit orders bouncing often lingered long after the festive euphoria subsided.

NDCA data showed it takes consumers an average of up to two years to catch up on payments missed in December. In the existing economic climate, it could take even longer.

“While we advise everybody to keep up their debt repayments over December, we recognise that for some this will not be achievable. If that is the case, get help from a reputable debt counsellor. Don’t delay, as it could affect your credit record, and if you wait too long even debt counselling may not be an option.”

 The NDC provided tips to help people be financially savvy over the silly season:

1. Don’t get caught out: If you get paid early, remember that you will have to stretch your salary until the next pay cheque. Allocate money for normal living expenses before you decide how much to spend on gifts and entertainment. Plan accordingly by factoring in that your existing debit orders will still run in December. If there isn’t enough money in your bank account to pay debit orders, you might fall behind and have your credit record affected. Even worse, you may be penalised with extra costs.
2. Resist overspending: If you get paid early in December and are lucky enough to get a bonus, you could suddenly have a lot of money in your account. Though you may feel flush, resist the temptation to splurge. Think first about your financial commitments.
3. Get help if you need it: After a difficult year, most people need a break and some time to recharge. That’s not going to happen if you spend the holidays worrying about how much you owe or how you’re going to make ends meet in January. A reputable debt counsellor, such as an NDCA member, will do a free assessment, advise whether you can benefit from debt counselling and explain how the process works. Having someone to help you can take away a lot of the anxiety dealing with debt.

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