Tips on how to minimise online shopping debt

30% of credit card holders say online shopping has created more debt for them. Are credit cards and online stores a bad financial pairing? Here are 5 tips on how to minimise online shopping debt.New research seems to indicate just that, with a significant proportion of Aussie credit card holders admitting they are accumulating more debt when shopping online compared with in-store shopping.

From a CouriersPlease (CP) survey of an independent, nationally representative panel of 1021 Australians[1], 30 per cent of credit card holders say that online shopping has created more credit card debt them.

Online shopping responsible for more credit card usage, compared with in-store purchasing

The debt might be explained by the fewer payment options when shopping online. The survey revealed that a slightly higher proportion of online shoppers (42 per cent of shoppers) use their credit card online than a debit card (40 per cent). Eighteen (18) per cent use a payment plan such as lay-by or ‘buy now pay later services’ such as Afterpay and Zip Pay.

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When shopping in store, however, just 35 per cent of shoppers use a credit card, and significantly more (47 per cent) use a debit card. In-store shopping also has the benefit of cash payments, with 16 per cent of shoppers using this payment method. A significantly smaller proportion of in-store purchases are made via a payment plan (just 3 per cent of shoppers use this method).

Online shoppers paying more credit card interest

When credit card holders were asked about the percentage of their card debt they pay off each month, nearly half (43 per cent) pay off just up to 75 per cent of their balance each month. Thirty-two (32) per cent pay off less than 50 per cent of their credit card each month, and 17 per cent pay off less than 20 per cent of their balance each month.

CP spokesperson, Jessica Ip, says: “Our research indicates that online shopping transactions in Australia are more likely to have a more positive growth rate than with in-store purchase levels, with more people relying on credit and buy-now-pay-later services – essentially with money they don’t have – when making online purchases.

“With the online market attracting a growing level of transactions, retailers are now looking to help eliminate consumer disadvantages that are unique to that market: deliveries and returns. Free and fast shipping will help promote repurchasing and increase customer loyalty.”

Jessica Ip’s 5 tips to help minimise debt from online shopping:

1. Avoid paying full price. Most retailers have regular sale or promotional periods that are cyclical and predictable. Where possible, wait until these discount periods to avoid paying full price. Alternatively, take advantage of promotional codes or coupons offered on websites and apps such as OzBargain.com.au and Honey which can be applied at checkout to make your purchases cheaper.
2. Consider shopping from online retailers that offer free shipping and returns. Many retailers now offer free shipping, particularly when a certain transaction level is reached. Shopping from online stores that offer free or discounted returns ensures you aren’t being penalised for your change of mind – and it can be a small step to not incurring further debt.
3. Check the refund or exchange policy of the retailer. Don’t assume that all retailers will offer a full refund, as some will only provide a store credit instead. Before making a large online purchase, familiarise yourself with the retailer’s return policies to see if you will get a full refund for change of mind purchases. If it turns out that you are unlikely to shop from this store again, a credit voucher may offer little value.
4. If you can pay it in full, do it. While the likes of Afterpay and Zip Pay offer interest-free instalments for your purchases, it’s often better to pay it in full to avoid carrying the debt. If you do use these payment services, ensure you understand the terms and conditions to avoid incurring any extra fees. For instance, Afterpay charges late fees for missed payments, so it’s best to set yourself a reminder to pay your instalments on time.
5. Use ad-blocker to avoid seeing personalised ad targeting that will encourage you to shop. How many times have you seen an ad appear on your browser featuring a pair of shoes you had your eye on? By using an ad-block extension on your browser, you are less likely to see ads that could tempt you to click and shop.