Australians are once again poised to rack up record‑breaking credit card debt over the holiday period, and the financial hangover could ripple far beyond household budgets into the fabric of small business Australia. New analysis based on RBA credit card data, estimates that Australians will spend a staggering $86.8 billion on credit cards between November and January, with $28.9 billion added in January alone if historical spending patterns hold. The sheer scale of this borrowing highlights the growing reliance on credit to fund big‑ticket holiday purchases and festive spending.

This mounting personal debt isn’t just a budgeting headache for households; the aftermath can create broader economic challenges. Last year’s research found that millions of Australians struggled to repay Christmas spending debts, with the average holiday debt around $1,634 per person, translating to a $2.7 billion collective burden. Moreover, many debtors (almost half) expected to take up to five months to repay what they owed, with 15 per cent anticipating more than a year.

Credit cards also incur high interest costs: when balances are not cleared, annual percentage rates can exceed 18-20 per cent, trapping consumers in a cycle of debt. For small and medium enterprises, the consequences are two‑fold.

1. Early boost, later bust
   Holiday sales typically provide a crucial revenue injection for small retailers, hospitality venues, and service‑based businesses. Strong festive spending can help clear inventory, improve cash flow, and even enable hiring and investment. However, once the holiday buzz fades and consumers shift focus to repaying credit card debt, discretionary spending often contracts. Reduced consumer demand in January and February can lead to weaker sales for SMEs, especially those reliant on non‑essential purchases. Indeed, Australian Bureau of Statistics data shows that business turnover frequently declines sharply in the post‑holiday months, with average drops of nearly 15% in January and 13% in February- a trend that often coincides with spikes in business failures.
2. Cashflow squeeze and broader financial stress
   Beyond slower demand, SMEs face persistent cashflow pressures. Surveys indicate that 89% of SMEs have seen higher operating costs (including utilities and supplier costs) in recent years. Inevitably, when households tighten their belts to manage personal debt, sales slow and SMEs’ revenue streams shrink at a time when they are already grappling with rising input costs. Late payments from clients can further erode working capital, with some SMEs losing more than $2,500 per month due to delayed invoice settlements.

The result? Some small businesses may struggle to service their own debts or invest in growth, and credit‑dependent SMEs could find it harder to secure new funding amid softening demand. Recent reports also show stagnation in business lending applications and a rise in tax‑related loan declines, underscoring anxiety about consumer spending and financial conditions.

Looking Ahead
Economists and financial counsellors urge consumers to plan holiday spending carefully, consider low‑interest options, and avoid relying solely on credit cards. For SMEs, proactive cashflow management- such as prioritising invoicing, building reserves, and adjusting staffing costs- can help weather the post‑holiday downturn. Without mindful financial practices, both households and the small business sector risk starting 2026 under pressure from a mounting ‘debt hangover’.

The post Holiday Splurge Threatens Families and Small Businesses appeared first on Small Business Connections.

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