How families 'revenge spent' themselves to the merriest Christmas ever

Wednesday, 3 February 2021

Many families paid off credit cards at their height of the Covid panic, but then loaded them back up with debt in the months before Christmas.

Families told researchers they planned to keep their Christmas spending down, but instead many “revenge spent” on presents and booze.

Revenge spending is a term that gained widespread usage international last year for consumers spending up after being deprived of the ability to go shopping during pandemic lockdowns.

But Daniel Shaw, managing director of Auckland-based market researcher Perceptive identified a peculiarly Kiwi version of revenge spending, in which people admitted they had given themselves permission to reload their credit cards with debt after having paid them off during the height of the pandemic panic in the middle of the year.

In December, Perceptive asked families about their Christmas spending plans, and people said they wouldn’t be borrowing to pay for the celebrations, and would spend less than usual.

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But despite many believing the Covid-19 pandemic had resulted in them becoming more conservative and cautious, their actual behaviour told another story, Shaw said.

Data captured by Paymark, which tracked retail card spending, showed a 6 per cent rise in Christmas spending, Shaw said, with big jumps in spending on liquor, sporting and camping goods.

Daniel Shaw, managing director of market research company Perceptive.

Retailers welcomed the spend-up.

Greg Harford, chief executive of Retail NZ, said the association’s core retailers saw spending in December up around a fifth on December 2019.

“It was much stronger than we expected,” he said.

Rising house prices made people feel wealthy, he said, and people felt a return of confidence, including the confidence to borrow to spend, he said.

“During the March lockdown, Kiwis paid off $1 billion of credit card debt, which in turn freed up more money they could borrow on credit,” Shaw said.

“The consistently high spend on credit cards over the Christmas period indicates this ‘revenge spending’ behaviour where Kiwis who have cleared their debt buy more on their credit card as a result.”

When Perceptive asked people after Christmas why they’d spent so much on their credit cards, 13 per cent admitted they had done it because they’d cleared out their credit card debit earlier in the year.

“In 2019, credit spending only exceeded debit spending in the month leading up to Christmas,” Shaw said.

“2020 saw credit spending exceed debit spending throughout the end of October, all of November and December and even in the first weeks of January.”

People also left their Christmas shopping later than they had the previous year, despite telling Perceptive before Christmas that they were better organised than in 2019.

“This is a classic example of cognitive bias where we overestimate our abilities or report what we’d like to be true, rather than what actually is,” Shaw said.

“Some attitudes don’t always translate into action and Paymark’s transactional data shows us this gap between claimed behaviour and actual behaviour.