Have you ever bought Christmas presents on credit? I’m not talking about small Christmas gifts, but an expensive gift that you went knee-deep into the overdraft facility for. Or had to take out a loan from the dealer or the bank.
–
You don’t have to reveal it. But you can already guess what I think of it. Namely nothing.
–
Don’t get me wrong: I think credit is a wonderful thing. Loans ensure that we can buy things that we urgently need for our everyday lives and cannot pay for in one fell swoop: the new kitchen after moving, the car for the new job. Computers, monitors and desks so that we can continue working in times of home office.
Of course, the loan for an apartment or a house in which we live is particularly useful. (Provided we don’t calculate too tightly.) And those who need a home for the young family have rarely been able to save enough to finance it without a loan.
–
But Christmas presents on credit? They should primarily be an expression of affection and solidarity. And who would seriously want to be given something when they know that the giver will tie a loan to their leg for it.
Borrowing money costs money
Do you give yourself something? Maybe the new TV for the winter (and the lockdown)? Nevertheless, nobody should take care of it. Because loans mean extra costs – in the Netherlands, loan advertising even has to be accompanied by the addition “Money costs money” – “Borrowing money costs money.”
And who knows how the financial situation might change while the loan has to be paid off. Especially during the corona crisis. After all, many German citizens seem to be aware of this these days. The number of those who want to spend more than 1,000 euros on gifts has fallen dramatically: while nine out of ten said that in the previous year, this year it is only six out of ten. So Christmas gifts on credit are not wise, and they’ll do it anyway. Still. This is also the result of representative surveys. Every third person finances gifts and expenses around Christmas from the overdraft facility. And just as many consumers buy consumer goods in installments, i.e. with a normal loan, the banking association wrote to us this week.
–
Most personal installment loans are not closed until January. This December, the banks are also partially closed. In December 2019, loans totaling 6.5 billion euros were taken out in January 2020 for more than ten billionis what the Bundesbank says.
This also fits the observation by Verivox and Check24 that the number of loan rescheduling went up significantly in January. At Verivox, the number of loans concluded in January was more than 60 percent higher than in December.
For savings banks and banks – as well as loan sharks – the Christmas business still seems to be working well: They are busy beating the drum.
–
Fulfill the “extra big Christmas wish”
In order to be able to fulfill an “extra big Christmas wish” for family, friends and perhaps even yourself, the Sparkasse Südholstein, for example, offers many attractive and practical financial products, “according to a current advertising text for this Sparkasse.
This week I also found advertisements for credit luck before Christmas from the Sparkasse Barnim near Berlin and the Nassauische Sparkasse near Frankfurt.
Or from the loan provider Cashper at the Maltese Novum Bank: »Have you already spent your Christmas budget? With Cashper you can easily apply for a mini-loan of up to 1500 euros. «In one installment, the loan should even be free of charge, repaid after 30 days, while the second installment is worth a hefty 149 euros in interest. Over the year, that would be around 60 percent interest after 60 days. Usually only Christmas geese are excluded. Cashper did not respond to attempts at contact via e-mail and Frankfurt telephone numbers.
Cashper was the outlier in the research. Online giant Amazon does not even get involved in such perfidious games. There it simply says: »Purchase on account. Order now, only pay in January. «First you make yourself and your family happy, and afterwards you realize that you couldn’t afford it.
What sounds customer-friendly actually has a big horse’s foot. The numerous gifts bought are not immediately noticeable in the wallet, the number and size of the bills are not getting smaller. They still show up with a regular look at the account. The consequences of the Christmas exuberance will only become apparent in mid-January. Also fits together with the observations from Verivox and Check24.
The installment loan can bring the barrel to overflow
You can see that the whole thing upsets me. However, I’m early with the excitement. The debt advisors say this week that problems with Christmas loans usually don’t hit them until March. In general, installment loans are not the biggest debtor problem. And it is not just the Schufa that observes that 98 percent of installment loans are paid back in Germany. But when Christmas gifts are then bought on credit, that is often the last credit that brings the barrel to overflow.
Most people are over-indebted if fate has just played a bad role: job loss, divorce or illness.
In many cases the problem is not just irrationality. But also convention and the unwritten rule “You don’t talk about money”. Hopefully you can explain to adults well that after six months of short-time work, the Christmas gifts are rather symbolic. But how do you explain it to your children?
The hard truth is: It would be better for the children, too, to understand that wishes that are not covered by the family budget cause mom and dad much more worry than joy in the medium and long term.
Back from questioning and philosophical to practical. What do the findings mean for you as a bank customer?
-
First: Avoid buying Christmas presents on credit if possible. Zero percent loans are also often more expensive than necessary, because the prices at dealers with credit are often higher than with dealers without the credit.
-
Secondly: The overdraft facility is even more expensive than an installment loan. Repaying 1,500 euros over two years from the ten percent overdraft facility costs 160 euros interest with even installments, with a four percent installment loan the interest costs would be 65 euros. Verivox writes to me that half of all their loans are now taken out at interest rates below three percent. Paying expensive Christmas gifts from the overdraft facility is therefore an economic one really bad idea.
-
Third: Make agreements with family and friends not to embarrass each other with expensive gifts, also to buy something (unnecessarily) expensive.
-
Fourth: If the gifts have already brought you into the red, take care of a debt restructuring and that cheapest loanyou can get. Before you pay the expensive overdraft interest for 12 or 24 months. Loan portals are actually good for that.
I wish you a merry Advent. And stay healthy!
–
