Don’t let Christmas debt slay you, says CAS

PRESS RELEASE

As shop-tills ring out merrily on high in December, Scotland’s Citizens Advice Bureau have come up with 10 Top Tips to help you have a great Christmas and a happy 2007!

First among them is not to overstretch yourself financially. You don’t have to laden yourself with debt in 2007 to enjoy Christmas 2006.  And it pays to educate yourself to know what to look for in the credit deals that will be pushed at you over the next few weeks and what to be wary of.

Of course we all splash out a bit over Christmas – but that doesn’t mean we shouldn’t still look for the best deal or throw caution to the wind.  Just a little bit of thought could potentially save you hundreds of pounds – and perhaps a lot of grief - in 2007...

1. Be realistic about what you can afford – and stick to it!  The worst way to do Christmas shopping is at the last minute, in a panic, pushing everything onto your credit card.
2. If you can afford to pay for goods outright don’t be persuaded to take out credit unless it really does work out cheaper.
3. If you are using credit, shop around a bit to look for the best deal and check that the repayments are within your budget.  Be wary about ‘Buy now, pay later’ offers.  Are you sure you’ll have the money then?  Remember - there are usually bruising financial penalties for late payment!
4. Read the terms and conditions of any credit agreement closely.  Ask if anything is unclear before you sign.
5. Avoid store cards – they’re usually an even more expensive form of credit than credit cards, many charging interest rates of around 30 per cent.
6. Don’t just run up an overdraft without talking first to your bank, either – this will be much more expensive than if you ok it beforehand.
7. Remember that other hefty winter bills, like gas and electricity, often arrive in January/February, just when you’re feeling the pinch after that big Christmas spend – so allow for these in your budgeting.
8. When it does comes to paying those bills, make sure you prioritise payments such as mortgage/rent, gas/electricity and council tax.
9. Are you a lone parent, on a low income, unemployed, a pensioner?  Have you maximised your income?  Are you getting all the benefits you are entitled to?  Do you qualify for tax credits or heating grants?  Your local Citizens Advice Bureau can help you check.
10. If you do think you’ve got in over your head financially, never ignore it or hope it will go away.  It won’t!  Get help – free, confidential and independent advice is available from your local CAB.

Spending pitfalls: what to watch out for…

Credit cards can vary enormously in terms of interest rates.  If you can clear your monthly balance, fine.  But the danger for many is that they allow the outstanding balance to build up month by month, on which interest is charged, increasing the amount even more.  People can then end up juggling debt around different credit cards just to keep their heads above water.

Store cards are one of the most expensive ways of borrowing, usually charging a higher interest rate than ordinary credit cards.  You may get an introductory discount on goods when you first sign up to a store card, but unless you are absolutely sure you can pay off your monthly bill in full, go for another form of credit.

Loans from mainstream banks or other lenders can be a better way to borrow – but check what the interest rate is and whether it is charged monthly, whether payment protection insurance is optional (or even added on automatically), whether any ‘arrangement fee’ has been levied, and what the penalties are for any missed repayments.  Always be extremely wary of securing a loan on your home.

‘Interest-free’ credit for a set period sounds a good way to manage spending.  But remember, if you don’t pay off the full amount by the set date you may be charged interest on the full purchase price, not just on the balance owing.  This could effectively double the cost.  And is no interest actually incurred at all during that set period – or is it just delayed until after?

‘Pay nothing at all for six months’ also sounds an enticing deal.  But are you really sure you will be in a better position to afford it then than now?  Is the loan interest-free?  And what are the financial penalties if you don’t pay in full after six months?

Payment Protection Insurance supposedly insures you against losing your job or being otherwise unable to keep up repayments.  But it’s usually expensive, and there can be a raft of exemptions that means the policy won’t pay out anyway.  If the payment is bundled together with the loan you will usually pay interest on this as well.  Check all the terms and conditions, the full cost and whether it would be cheaper getting insurance – if you are really sure you need it - from another provider.

Extended warranties are guarantees a product won’t go wrong beyond the usual six or twelve-month statutory guarantee-period.  They are often heavily pushed by sales staff but can add hugely to the cost of an item and in many cases don’t represent particularly good value for money.  Remember, too, that if the cost of an extended warranty is added to a credit agreement you could end up paying interest on this as well – significantly bumping up the total price.

Notes for News Editors

1. A survey by the Clydesdale Bank survey has found that 2.4 million Scots (58% of the adult population) will go Christmas shopping without knowing how much they have in their bank accounts, while one in 10 will wait until their January statement arrives to discover how much they’ve spent.  One in five admit they over-spent in the past simply because they have not checked their finances properly.  30% reveal that not checking their balance keeps them awake at night.
2. Each CAB is an independent charity, run by a committee of local people, and responsible for raising its own funding. 85 per cent of CAB workers are trained volunteers.
3. The first bureaux in Scotland were established in 1939 as a wartime information service.  There are now 76 CAB offices across Scotland, which operate from over 200 service points, and which form the country’s largest independent advice network.
4. CAB advice services aim to be freely available and accessible to everyone in the community.
5. Consumer debt is now the single biggest issue that CABx deal with.  Last year, CABx in Scotland dealt with debt totalling over £211m.
6. Practical and up-to-date information is available online from Adviceguide (www.adviceguide.org.uk), including factsheets you can print off.