Talk Money

Credit card provider Egg has said that last minute panic buying will lead to a consumer overspend of £594 million this Christmas.
4 million shoppers will buy their Christmas presents in the week before Christmas with a further 800,000 leaving their festive gift buying until Christmas Eve.  Poor planning leads to panic buying and budget overspend. According to Egg, last minute shoppers will on average exceed their budgets by 39%, equivalent to £150 per shopper.
Alison Wright, Egg Chief Marketing Officer said:
“We still often resort to last minute panic buying.  Consumers need to find ways to drive down the overall cost of Christmas – one way seems to be by avoiding those last minute shopping sprees, when lack of choice and panic buying are rife.”
The Egg research found that there is no gender stereotyping when it comes to Christmas shopping, Women and Men are just as likely to panic buy at the last minute.

A survey by Your Money Show has found that 20% of Britons will still be paying for their 2007 Christmas shopping in June 2008.  Moreover, 10% will be paying off their credit cards into September and nearly 4% into December.  Research from MoneyExpert showed that 4.4 billion Brits are still paying off credit card bills from Christmas 2006.
Your Money Show found that Londoners were the biggest spenders at Christmas with 20% of people shelling out more than £1000 compared to East Anglians, the most frugal, who spend on average £500 each. Despite these high costs, only half of people save for Christmas.  The biggest savers are in the North East, but at the same token they are also the most likely to get in debt over Christmas.
£53billion will be spent in the UK this Christmas, with £11.7billion spent on credit cards.

Christmas shoppers are using more cash this year, potentially at the expense of credit cards. Cash machine operator Link has reported that ATM withdrawals are up 7.1% for the first ten days of December compared to November. In the previous 4 years, this figure has been around 5%.
In November, the payments association APAC predicted a fall in cash spending of 5% over the Christmas period compared to 2006 and a predicted retail spend of £53billion. This predicted spending would be a rise of 4% compared to 2006 which APAC said would be fuelled by credit card spending.
However, it appears that worries about the ongoing credit crunch have led consumers to rein in credit card spending and use cash.  According to retail spending figures from credit card company MasterCard weak sales were reported in November, slowing the annual retail sales growth rate down to 4% from 4.5%.

Just 1% of Britons have complete control over their finances and the vast majority of people show irresponsible behaviour with regards to their credit cards, banking and shopping around for the best financial deal.
This is according to a survey by Abbey which sought to find out “financial fitness” on a percentage scale, with 0 being a “financially fit machine” and 100 being “financial obese”.  The survey showed that 46% of women and 41% of men were “financially overweight”. People in Wales and the South-West were the fittest financially (42% overweight) whereas people in the North of England were the most overweight financially (46% overweight).
Sue Hayes, Director at Abbey said:
“We would encourage people to review the financial products they hold and shop around to ensure that they are getting the most competitive deal available.  Like exercise, a financial workout can take a bit of effort but for most people the rewards are well worth the exertion.”

The Post Office has warned the 2.4 million Britons heading overseas for Christmas this year that they could face “hidden” credit card charges in the New Year.
Many card companies charge an extra 2.75% in commission for each overseas transaction, a fact many consumers are unaware of until the charge appears on their bill.
Post Office Director of Lending Gary Fitton said:
“Many people could be returning from their Christmas break with a lot more than ‘memories and mementoes’ due to unnecessary card charges.”
According to the Post Office, 49% of festive holiday makers plan to use their credit cards whilst abroad.

High Street banks will be allowed to discriminate in their provision of credit, dependent on age.  Currently older people find it more difficult to obtain credit due to doubts that they will live long enough to pay off the loan.
Former Bank of England executive Mike Young reviewed the Banking Code in early 2007 and recommended an end to credit companies discriminating on the basis of age.  He said:
“The guidance should be amended to ban credit rejection simply on the grounds of reaching a certain age.”
However, The British Banking Association (BBA) decided not to take this recommendation on board. Director of Retail Banking at the BBA, Eric Leenders said:
“The banks feel they should be able to make commercial decisions and take account of factors they might feel are relevant – and one of the factors could be age.”
Young’s review recommended more transparency on loans and saving products, along with more diligence from banks when selling products to people who represent a credit risk.  Consumer groups criticised the review for not taking stronger measures against matters such as bank charges.

The Bank of England’s Monetary Policy Committee is under pressure to cut interest rates today. Interest rates rose five times since August 2006, but have been unchanged since July. However, analysts expect the cost of borrowing to drop to 5.5% from 5.75%. Global Insights Howard Archer said:
“[the December 2007 rate decision] is one of the tightest calls ever”.
A key factor in a rate cut is the growth in the Libor rate, the rate at which banks lend to one another. This has led to the “credit crunch” that consumers and banks alike have suffered in the second half of 2007.

The British Bankers Association (BBA) announced new standards for Individual Voluntary Arrangements (IVAs) to help indebted people through their financial problems.
Credit providers worked together to agree industry standards for the marketing, advice and documentation associated with IVAS. The standards will be put in place by February 2008 and will make the IVA process more “streamlined”. Angela Knight, BBA Chief Executive said:
“People in debt and their creditors need to know that when an IVA is proposed it is the most appropriate solution. The standards will give [people in debt] the reassurances they need in order to make the right choice for their financial futures”.
According to Government statistics, 26,659 people were declared insolvent in England and Wales during the second quarter of 2007.

High interest rates, rising prices and slowing wage growth will make this January’s debt hangover particularly difficult.
January is the most common time for Citizens Advice to receive enquiries for loan arrears, debt arrears, credit card bills and overdrafts.  Citizens Advice is now recommending Britons to plan their spending as it prepares for a surge in post-Christmas debt enquires. With Barclaycard, Citizens Advice has set out a guide to avoid debt problems in the New Year.
Teresa Perchard, Director of Policy at Citizens Advice said:
“With a little forward planning, Christmas panic buying can be avoided.  We hope these top tips will help people take control of their money as Christmas approaches so they do not start the New Year with a debt hangover.”
Below are the top tips outlined by Citizens Advice and Barclaycard to avoid a post- Christmas debt hangover:
•    Plan early for Christmas. Be realistic and budget.
•    Do not forget everyday bills.  Remember rent, mortgage and utility bills. The consequence of missing these bills can be severe.
•    Do not bank on an overdraft. Talk to your bank first, unauthorised overdrafts are expensive.
•    Avoid shop credit offers. Stay away from buy now; pay later unless it really does work out cheaper.  Interest free credit sounds attractive, but can be hard to budget for and expensive if you miss a payment.
•    Shop around.  Find the best deal. Price comparison websites make it easy.

Britons looking for a loan or mortgage should do so before Christmas, or potentially miss out. The impact of the credit crunch is being felt, with personal loans and mortgages becoming increasingly difficult to secure.
One in ten lenders has left the unsecured loans market including GE Money and Leeds Building Society. This week Hanley Economic Building Society and Eskimo Loans withdrew their personal loan offerings. Esther James of Moneyfacts.co.uk said:
“Such a large reduction in just the last month is worrying. With no signs of rate rises slowing, it’s a rather unsettled market. The credit crunch is showing its strength in the personal loan market. With less choice, a more cautious lending strategy and the impending decision on payment protection insurance sure to shake up the market, the 2008 loan market could look very different.”
The mortgage market is also feeling the credit crunch and potential customers are advised to act early. Borrowing parameters are getting tougher and lenders are making applicants wait. The Woolwich, for example, has a one-week wait, just to look at new applicants.  Katie Tucker, technical manager at mortgage broker John Charcol said:
“The credit crunch means that even in balance sheet lenders who have funds available are in no hurry to price themselves into popularity because it could bury them in business and ruin their service levels. It is vital borrowers allow extra time for applications, the temptation to delay applying until after Christmas may cost remortage customers an unexpected month on a nasty high rate if they revert to their lenders SVR while they are waiting.”