Beware of credit costs when spending: Inquirer

MANILA (PHILIPPINE DAILY ENQUIRER) – A survey released last week indicated how household spending in the Philippines is likely to evolve: consumers plan to buy more non-essential items over the next three months.

Data from the Consumer Pulse study for the first quarter of 2022 conducted by the local unit of the American consumer news and information company TransUnion revealed such a change in spending priorities after the reopening of the Philippine economy earlier this year.

“More respondents said they would increase their spending on retail purchases, discretionary personal spending, retirement funds and major purchases,” the study said, adding that each of these categories saw a five-point increase. points compared to the first quarter of 2021.

“From optimism about improving household incomes to projected increases in spending in key areas, Filipinos are increasingly optimistic about our recovery from the global pandemic,” noted Pia Arellano, President and CEO of TransUnion Philippines.

The study showed that 36% of Filipinos saw their household income improve over the past three months, while 75% expected it to increase further over the next 12 months.

Given this – as well as the rush to emerge from the pandemic – Filipino consumers are eager to spend more on retail purchases and “big” items, such as cars and household appliances, according to the survey. .

According to the study, a growing number of young Filipino consumers, or Generation Z, are also expected to pay for their new purchases with credit.

TransUnion added that 57% of people with a “very good” debt rating said they plan to apply for new credit. The company surveyed 1,078 adults in the Philippines across all major age groups to gain the information and insights needed for a comprehensive understanding of changing attitudes and conditions in the country.

Psychologists believe that the desire to buy things or travel for recreation after a long period of deprivation is normal human behavior. It satisfies that bottled up craving for items or activities that have been missed over time.

This is the case during the Covid-19 pandemic which began two years ago. Pleasure travel has all but stopped, entertainment venues and physical stores have all but shut down. As quarantine restrictions began to ease around the world, more establishments – shopping malls, bars, travel agencies – reopened.

Consumers confined to their homes for months are suddenly filled with excitement, with many shopping like never before. Leisure travel has also quickly resumed, giving hope to resorts and airlines hard hit by the health crisis. This is where caution is called for.

The Philippine economy is certainly not out of the woods yet. The pandemic is still here, despite improving Covid-19 numbers and easing quarantine levels across the country.

The ongoing war between Ukraine and Russia continues to disrupt global oil and agricultural commodity markets, and the sharp spike in local oil prices is a manifestation of this. As oil prices rise, the cost of other basics – for example, food and electricity – will follow.

It’s true, as the life insurance company Pru Life UK stated in a wellness article titled “How Trade Therapy Can Help You Cope”, that psychologists have determined that the shopping produces positive feelings for those who indulge in it.

The reason, he continued, is that shopping activates the brain’s pleasure centers to release the “feel good” hormone called dopamine, while another psychological benefit is that it “serves as a of relaxation, entertainment and escape”.

The caveat, however, is that while this can have its benefits, non-essential spending can also affect an individual’s financial health. For example, uncontrolled spending has been one of the main reasons for the accumulation of credit card debt.

“It’s okay to go shopping to feel good, but keep your shopping reasonable and within your means. Use credit cards with caution. If you notice a tendency to be too quick and loose with your credit card, don’t bring them every time you shop Commit to leaving your credit cards at home unless you really need them It’s easier to control spending when you pay in cash,” advised the Pru Life article.

In fact, credit cards should be used for emergency purchases of essentials, not aspirational things like expensive smartphones or first-class leisure travel.

Consumers should think twice before indulging in retail therapy. There is nothing wrong with fulfilling one’s desires. However, it is important to clearly define your spending priorities.

For non-essential items, using debt to pay for these things often ends in disaster – the inability to repay mounting debt. Avoid the temptation of simply charging purchases to your credit card.

It really isn’t worth having that brief satisfaction that retail therapy brings. A person is better off saving – or investing – that extra money they have today for the rainy days that are sure to come.

  • The Philippine Daily Inquirer is a member of the Straits Times media partner, Asia News Network, an alliance of 23 news outlets.

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