Christmas Gifts: Debt Counseling with Warning
Christmas is around the corner and many people want to lavishly gift their loved ones. The temptation is great to dig deeper into the wallet than financial means allow. "Christmas is a peak phase of consumption, therefore it is naturally a debt trap," says Clemens Mitterlehner, head of the Association of Debt Counseling ASB, in an APA interview. He warns against debts for Christmas gifts - "whether it's installment purchases or borrowing".
Mitterlehner: "Vicious Circle"
"It is socially such that people define themselves a lot through gifts. Consumption simply has a certain status and importance, especially at Christmas," says Mitterlehner. Many people "simply cannot resist" this consumption pressure. Parents want or have to gift their children, which according to the expert often only works through installment payments and credit transactions. He speaks of a "vicious circle".
In the weeks before Christmas, retailers entice with a plethora of offers, including for financing gifts. "The danger with installment payments, for example, is not when I use it once, as I probably won't lose track," explains Mitterlehner. "It becomes difficult when I do it multiple times or every year," he adds. Installment transactions often run over three years - meaning, for this year's "Christmas, I will still be paying next year and the year after" - a "dangerous mixture," says Mitterlehner.
"Many cannot even afford a private bankruptcy"
Since around 2022, inquiries at state-recognized debt counseling services have been at a high level. The average debt amount in the consultations is around 60,000 euros, according to Mitterlehner - although this is not representative of the general population, but only includes those who come for counseling. How can it be that someone accumulates such high debts? About two-thirds of these debts "very often consist of interest, collection, court, and attorney fees," explains the expert. According to a study, debts that are not paid would triple within eight years.
Mitterlehner cites unemployment and income reduction as the main reasons for over-indebtedness. While the number of consultations remains at a relatively high level, the "settlements, namely private bankruptcies," stagnate, emphasizes the ASB head. "Many people have debt problems, but many cannot even afford a private bankruptcy," explains the expert. This is especially challenging for people with low incomes, who are already under significant pressure due to high inflation.
When to Contact a Debt Counseling Center?
According to Mitterlehner, it's time to contact a debt counseling center when "the account is constantly in the red, when there are wage garnishments, when rent remains unpaid, and when there is no money left for groceries at the end of the month". To counteract the debt mountain, Mitterlehner believes "good and early" financial education is needed. In the direction of the federal government, the ASB head says debt counseling must be adequately funded - "it would be counterproductive to thin out debt counseling services".
(APA/Red)
This article has been automatically translated, read the original article here.