Warning over Christmas debt stress

Middle income earners and younger New Zealanders are at risk of debt stress by Christmas, credit reporting agency Dun & Bradstreet warns.

Its latest survey of consumer credit expectations shows a "debt divide" emerging in New Zealand as the global credit crisis impacts on spending behaviours.

One third of middle income earners and younger people expect to be forced to use their credit card to make ends meet, while one third of high income earners expect to lower their debt levels in the coming three months.

The survey conducted last month shows younger New Zealanders and middle income earners (those earning $30,000-$49,999) face the greatest risk of debt troubles.

People aged between 18 and 49 are showing the most significant signs of problematic credit card use, with 31 percent expecting to use their credit card to cover otherwise unaffordable expenses in the next three months.

Credit demand is highest in the same age group, with 19 percent expecting to make a new credit application in the December quarter.

Six percent of low and middle income earners expect to miss bill payments in the same quarter.

Dun & Bradstreet New Zealand general manager John Scott said the divide between the "haves and have nots" has become increasingly evident as the economy slowed and credit tightened.

"A challenging local economy combined with the impacts of the global credit crisis have hurt the family budgets of certain demographics more than others," he said today.

"High income earners intend to rein in their debt, however, for some sections of the community managing the family budget has become increasingly more difficult."

Seventeen percent of New Zealanders expect their level of household debt to be higher in three months time, down from 24 percent last quarter. But 20 percent of middle income earners and those aged over 50 anticipate higher debt levels by Christmas, while 21 percent of those not working share this expectation.

Families with children have the most significant expectations for new credit applications at 20 percent, compared with the national average of 15 percent.

Mr Scott urged people to be careful with their finances to avoid over-indebtedness and the implications of defaults on their ability to access affordable credit.

"As we approach Christmas, a traditional boom time for consumer spending, New Zealanders need to be particularly diligent in managing their credit facilities," he said.

"This is particularly important for younger people and middle income households which are already showing signs of debt stress.

"Payment defaults are listed on a consumer's credit file for up to seven years. In the current environment, where banks are only willing to lend to those that don't have adverse information on their record, missed payments could cause problems should the need to access credit arise."

- NZPA