Ever been midway through buying Christmas presents and realised you’d run out of cash?

You aren’t alone. Over-indulgence at the dinner table seems to extend to many Australians’ wallets – with dire results.

A new report by credit analytics firm Veda shows those who apply for credit cards in the lead-up to Christmas are much more likely to default later.

The report states that people who apply for a credit card between October and December are 20 per cent more likely to default on their credit card loan than those who apply for one in the first six months of the year.

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“What it indicates is that many Australians are overextending themselves in the lead-up to Christmas and what it does is it puts them into debt stress in the new year,” says Veda spokesperson Belinda Diprose.

Last year, the average Australian was expected to spend $993 during the Christmas period, according to a Commonwealth Bank report.

Don’t be caught out by forgotten incoming bills. Photo: Shutterstock

While this may sound like a manageable amount, data from budgeting app Pocketbook shows that 60 per cent of Australians spend more than what they made over the festive season.

So how can you best prepare for the Christmas season?

Don’t forget regular spending

It’s important to remember that the holidays don’t only bring increased spending on gifts, but more money is tied up in entertaining, eating out, travelling and groceries.

It’s also easy to forget ongoing financial commitments you may have over the holiday season, such as personal loans and mobile phone bills.

“It’s really important to keep track of all your credit commitments,” Ms Diprose says.

“Credit is not just your credit card, it’s also things like a mobile phone contract, a wireless internet contract, utilities like electricity and gas and also more obvious ones like your personal loans and mortgages.”

Defaulting will hurt you later

If you do default on credit card repayments, you may be looked on unfavourably by lenders, Ms Diprose warns.

“If you do end up with a default on your credit report, it stays on your credit report for five years,” she says.

Be realistic about what you can spend on each person. Photo: Hardie Grant

“For those five years, it can make it a little bit more difficult for you to access credit or to perhaps access credit at the best rate.”

If you are experiencing difficulty, tell your credit provider. There may be things they can do to help.

Be realistic about your budget

Money blogger Suzy Freeme from simplesavings.com.au says it’s important to figure out how much you can realistically spend on each person.

“I think the main thing is to be honest about what you can afford,” she says.

“You have to be able to say to yourself: ‘If I can’t afford to spend $50 on each gift, then I can’t afford to spend $50 on each gift on my credit card’.”

Ms Freeme agree that it’s important to think about bills you may have over the holidays.

“Christmas is such a time of overindulgence on every possible level that even if you sat down and worked out your budget, unless you’ve factored those things in, you’re still going to be behind the eightball.”

Top four tips to manage Christmas spend

Don’t use your credit card: Ms Freeme advocates saving throughout the year and avoiding using your credit card to enter the new year without credit card debt “hanging over your head”.

Keep track of bills: Ms Diprose says it’s important to keep track of all the credit commitments you have over the holiday period, including loans and phone and utility bills, and budget for those too.

Spend in stages: Leaving Christmas budgeting until November is “insanity”, says Ms Freeme. Hunt out bargains which would make great presents throughout the year, and don’t be afraid to start budgeting earlier.

Be realistic about what you can spend: Ms Freeme says she would spend $50 on gifts before realising she could only afford $12 per person. She says nice homemade gifts like peanut brittle are still well-received.