CAB top tips for Christmas spending

PRESS RELEASE

The global credit crunch makes it more vital than ever that consumers take control when spending, warns Scotland’s Citizens Advice Bureau service as the nation embarks on its December shopping splurge.

“With Christmas coming up - and with it the temptation to put it all on plastic - people should remember they will be paying significantly higher rates and fees than last year,” emphasised Kaliani Lyle, chief executive of umbrella body Citizens Advice Scotland.

There have been 125 separate credit card fee and rate increases in autumn alone, CAS emphasises.  Meanwhile, in a further sign of a tightening market, nearly half of those applying for new credit cards – mainly those aged 25 to 34 - are being refused.  “And remember, most people’s earnings have not increased by anything like the degree that interest rates, fuel bills or council tax have, so they should budget for this,”  said Ms Lyle.

“OK, we all splash out over Christmas.  But that shouldn’t mean throwing caution to the wind.  A little bit of thought could potentially save you hundreds of pounds – and just maybe a lot of grief - in the new year... “

The CAB service is today issuing its annual ten top tips to help consumers enjoy Christmas 2007 without suffering too severe a financial hangover in 2008.

CAB Top Ten Tips for Christmas

1. Be realistic about what you can afford!  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 take out credit unless it really does work out cheaper.
3. If you are using credit, shop around for the best deal and check 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. Store cards are usually a 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 or credit union – 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?  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.

The CAB service is keen to highlight some particular spending pitfalls.

• Credit cards can vary enormously in terms of interest rates.  And store cards are one of the most expensive ways of borrowing.  A loan from your bank or credit union, for instance, might be a better way to borrow, but check what the interest rate is, whether insurance is optional or even added on automatically, whether there is any ‘arrangement fee’, and what the penalties are for missed repayments.
• Some banks offer 'personal pricing' loans to over-the-counter borrowers.  But as there is no set interest rate you can’t easily compare this to other credit offers.  Again, shop around for the best deal.
• Always be extremely wary of securing a loan on your home!
• ‘Interest-free’ credit for a period can be 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.
• ‘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?  Check what the financial penalties are if you don’t pay in full after six months.
• Payment Protection Insurance is something the CAB service has been particularly critical of.  It’s supposed to insure you against being 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.  If the payment is bundled together with the loan you may be paying 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 sure you need it - from another provider.
• Likewise, be wary of extended warranties.  These guarantee a product won’t go wrong beyond the usual statutory period.  They are often heavily pushed by sales staff but can add hugely to the cost of an item and in many cases aren’t particularly good value.  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.

“We’re not saying the high street is like the Wild West,” Ms Lyle said. “But we are saying don’t rush into the first deal that’s offered to you.  Shop around a bit first.  Make the wrong choice and you could find yourself paying a lot more than you bargained for in the long run.”

Notes for News Editors

1. Each CAB is an independent charity, run by a committee of local people, and responsible for raising its own funding.
2. Around 80 per cent of CAB workers are trained volunteers – if you’d like to help your local community for just a few hours each week, contact your local bureau manager, or volunteer through the CAS website – www.cas.org.uk
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. Images and logos of the CAB service are available from the CAS press and communications officer (see contact above).
5. Practical and up-to-date information is available online from Adviceguide (www.adviceguide.org.uk), including fact-sheets you can print off.