Devon County Council

From Adrian Lane, Exeter 383262, November 17, 2008

THE credit crunch may make the high cost of Christmas even more difficult to afford this year, but shoppers are being urged to avoid the temptation of credit or loans to help cover their festive costs.

As part of this week's National Consumer Week (17-21 November), Devon County Council Trading Standards Service and Exeter Citizens Advice Bureau have joined forces to offer advice on how to avoid starting the new year with a credit hangover.

Exeter Citizens Advice Bureau has given consumers advice in relation to over £3 million in unsecured debt so far this year. Store cards and credit cards were the biggest problem, and its busiest period was the quarter following Christmas.

Steve Barriball, Director of Exeter CAB, said: "If you only do one thing this month, work out how much you can afford to spend on each person this Christmas and stick to it."

Devon County Council Trading Standards Service receives calls and letters from people who have fallen victim to excessively high loan repayments. This year alone, officers have come across interest rates on unsecured loans which were in excess of 250% APR (Annual Percentage Rate). An interest rate this high could mean that borrowing £1,000 could ultimately see you paying back three times as much as the loan amount over just a few years.

Peter Greene, Devon County Council Trading Standards Fair Trading Manager, said: "Cases of extremely high interest rates are exceptional, but it illustrates one of the potential traps that consumers can fall into if they are not careful. If you do buy on credit, you should look for the most economical way of doing so."

Devon County Council Leader Brian Greenslade said: "It is vital to be well informed and obtain all relevant information, before signing up for a credit card or loan. No matter how small the small print is, read it in full before you sign."

Devon County Council Trading Standards Service advises following FIVE GOLDEN RULES to help people avoid a Christmas blighted by debt and credit card worries:

1. Avoid high interest rate store cards and loans.

Store cards typically have an APR of around 25%-30%; almost double that of most mainstream "bank" credit cards. Many stores aggressively promote store cards around Christmas with incentives; however they will be looking to get their money back. Avoid them if you can, but if you do fall prey to temptation pay these off more quickly than other cards in your wallet and you will save large amounts in interest charges. Check the interest rates on offer and compare different forms of credit to see how much you have to pay in total over the whole loan period. Some forms of credit such as doorstep credit can have an extremely high interest rate which you may struggle to pay back. If you must borrow, interest rates offered on bank, building society or credit union loans can be more competitive than credit card or current account overdraft rates.

2. Beware of penalty charges on store and credit cards.

In the spending spree for presents it is easy to stray over your credit limit or be late making your monthly repayment. Make sure that you don't, because typical late-payment and over-limit charges are around £20 for each event. Make a late payment and this charge, when rolled together with interest charges, may push you over your limit, a double whammy with even more penalties.

3. Low APR balance transfer cards - new purchases may be charged at the full APR.

There are many credit cards offering a low rate of interest for a limited period for balance transfers. If you are thinking of signing up for one of these to extend your credit at Christmas check its terms first and make sure you understand just where your monthly repayments are going. Some require you to pay off the transferred balance first so all new purchases will be charged at the full rate APR for months to come.

4. Are you protected?

Even if you don't need extended credit, using your credit card for purchases of items having a cash price of over £100 may give you the extra protection of being able to make a claim against the credit company as well as the retailer if the goods are faulty or are not delivered or the supplier goes bust. Provided you avoid interest payments by paying off your card balance each month, this can be a valuable extra protection.

5. Be safe online.

Guard against fraud when using your credit card to make purchases on the Internet. Always use a known or trusted retailer. When entering credit card details look for the padlock at the bottom of the screen and 'https:' in your web browser's address bar. Many sites have the "Internet Shopping is Safe" logo on their pages. If you do discover that your credit card or identity details have been used fraudulently don't ignore it. Report it immediately to the police and your credit company and see the CIFAS website at www.identityfraud.org.uk for further help.

Consumers are also urged to consider the following before committing to any credit card or loan:

• Can you afford it? Work out a household budget by listing your weekly incomings and outgoings. Look at the interest rate and length of agreement. Consider the total amount you will be paying over the life of the loan, as well as the monthly payment. Ask for a written quotation, take it home and consider it carefully.
• Can you buy the goods or services cheaper elsewhere?
• You don't have to arrange the loan through your chosen retailer. You could ask your own bank, or other sources of finance. They may have special offers and lower interest rates.
• Have you been offered payment protection insurance to cover the loan? Do you need it? Will it pay out straight away in the event of a claim? Will it cover your circumstances? Many policies, for example, will not cover anyone who is self-employed or will not cover some medical conditions. Ask for a copy of the policy and read it carefully. Check that what the salesperson told you is written in the policy document.
• Do not take out a loan secured on your property without considering the consequences. If your circumstances change and you cannot keep up the payments, you could lose your home.
• Most important of all, however, no matter how small the small print is -MAKE SURE YOU READ IT, IN FULL, BEFORE YOU SIGN!
• As soon as Christmas is over, start saving for next Christmas. Credit Unions and Building Societies offer special Christmas savings accounts which pay interest or a bonus and make it harder to withdraw the money before Christmas.

Devon County Council Trading Standards Service has launched its new anonymous tip-off hotline, Trading Standards Confidential, this week. You can now report illegal trading practices, or get advice if you think you are the victim of a scam, with the peace of mind of remaining anonymous. Call Trading Standards Confidential on 01392 381380 and speak to an advisor, or leave a message, in confidence today.

If you require consumer advice, call Consumer Direct on 08454 04 05 06. If you think you are the victim of a 'loanshark' (an unlicensed credit broker) contact the Southwest Illegal Money lending team on its new confidential Loan Shark Hotline on 0300 1234 247.

Notes to Editors:

For interview or queries, contact Peter Greene, Fair Trading Manager, Devon County Council Trading Standards Service on 01392 382728. Or, Steve Barriball, Director, Exeter Citizens Advice Bureau on 01392 208130.

With the cost of Christmas now around £2,200 for British families, many of us are now relying on credit cards to fund the period. It is estimated that Devon consumers alone are carrying over £11bn of debt (including housing debt).

Bank of England figures show that gross spending on credit cards leaps at Christmas. Putting all the costs of Christmas on credit can place major financial strains on card users and getting it wrong could mean you risk still paying off this Christmas's debts in December 2009.

CIFAS is a fraud prevention service established by lenders in the UK credit industry.