Black Friday & buy now, pay later: The dark reality of taking on Christmas debt

"Debt becomes more like a rent payment that people get so used to paying, they don’t focus on getting rid of the repayment,” says finance expert Sasha Lockley. Photo / 123rf

Many Kiwis will take on extra debt this festive season, but doing so has its risks, warns a finance expert.

Sasha Lockley, co-founder and CEO of Money Sweetspot, said the dark reality of debt for many people is it isn’t ever paid off.

“Debt becomes more like a rent payment that people get so used to paying, they don’t focus on getting rid of the repayment,” Lockley said.

“Nearly all applications we have [at Money Sweetspot] include credit card debt that has been around for years.

“The trend we see in the younger generation is that the buy now, pay later [BNPL] facilities are used like a credit card. So they never really get paid off either.

“We are a nation in debt and we stay there.”

And as Black Friday nears – a shopping season that has increasingly become popular for customers looking to get a headstart on Christmas – Lockley says there are early indications that people are seeking debt for Christmas.

“I would say that this month in particular [November], we are now getting lots of applications for Christmas debt,” Lockley said.

“So how are people managing Christmas? Looking for debt, because the idea of spending less isn’t their focus, it’s how to find the cash to spend now and worry later.

“It’s a trend that happens every year ... spend now and worry in the new year and find debt to pay off debt and reset and go again.

“The trouble is that means that every year people are maintaining or worsening their financial position through debt.”

Lockley said February is always the busiest month for debt consolidations in the year.

A survey from price comparison service PriceMe found 51% of Kiwis are planning to shop this Black Friday, up from 35% last year.

Gavin Male, founder and CEO of PriceMe, warned that while inflation was starting to drop, shoppers may still end up paying an inflated price for discounted items this Black Friday.

“It’s never worth getting into debt for non-essential purchases, so on Black Friday, we’d recommend shoppers compare prices across multiple retailers to ensure they’re getting the best deal.”

Lockley said the debt pain really hits people when something unpredictable happens.

“[Then] the amount of debt that someone was able to afford becomes unmanageable,” she said.

“She’ll be all right is an okay philosophy ... until she isn’t.”

Recent figures from Centrix show around 458,000 Kiwis were behind on their payments in September, equating to 12.12% of the credit-active population.

Arrears are 3.5% higher than last year.

“We expect arrears to rise over the summer period, in line with forthcoming festive spending and wider seasonal trends,” said Centrix managing director Keith McLaughlin.

BNPL has been the most popular first credit product by far since 2018, with 32% of new-to-credit consumers in 2023 and 2024 choosing BNPL as their first credit product, according to Centrix.

Positively, BNPL arrears were trending backwards, falling to 6.1% in September, the lowest level since January 2022.

Jeremy Hoskin, managing director at Super-Advice NZ, said there were other options instead of spending money you don’t have this Christmas.

“Using debt to fund consumerist desires is simply robbing future you of the cash. We recommend things like: potluck family meals, homemade gifts that create memories and nostalgia with a reminder that Christmas is about family togetherness and gratitude – not spending money you haven’t earned yet.

“Taking longer-term loans or racking up credit card, store card debt that is not paid off in full during an interest free period is never a good option for the holiday season.”

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.