The Citizens Advice branch that covers Stone is calling on people in the town to think twice before taking out a payday loan to cover the costs of Christmas, which could bump up the final amount by almost £600. They have also issued some top tips on being wise when it comes to Christmas credit.
In the past 12 months (December 2014 to November 2015), local people asked Citizens Advice Staffordshire South West – which has offices in Stone, Stafford, Rugeley and Cannock – for advice on payday loans amounting to £118,786. This is an average of £1,070 per client who came to the local charity for help with a payday loan query.
New analysis from national Citizens Advice finds the average spend for Christmas jumps from £821 to £1,413 if paid for with a typical payday loan of three months.
As people start putting the finishing touches to their shopping lists, Citizens Advice Staffordshire South West is encouraging people in Stone who are thinking about using credit to make sure they understand the final costs, once interest and fees are accounted for.
National Citizens Advice calculated how much the average cost of Christmas would rise if it was paid for by a payday loan, credit card or overdraft and then repaid three months later. Its results show:
- Dipping into an arranged overdraft can hike up costs by 15% to £945
- Paying for Christmas on a credit card can push the total cost up by 8.4% to £891
The charity also ran an analysis on a number of popular Christmas goods to highlight the significant price hikes if paid for with credit:
- A turkey that costs £25 could end up costing £43 on a payday loan
- A self-balancing scooter ‘hoverboard’ priced at £299 could set buyers back by £514 on a payday loan and £344 on an overdraft
- A tree retailing at £45 could cost £77.40 on a payday loan and £48.80 on a credit card
- A Star Wars Millennium Falcon toy (RRP £92) could cost £158.24 on a payday loan and £105.80 on an overdraft
- A 50ml bottle of perfume that retails at £44.50 could cost £76.54 on a payday loan.
[box type=”shadow” ]Sue Nicholls, chief executive at Citizens Advice Staffordshire South West, said: ‘Paying for Christmas on credit can spell debt problems in the new year. If you do decide to turn to credit, make sure you understand all the costs involved and whether you can afford to pay it back.
“As Christmas gets nearer, it is a good idea to put together a budget and stick to it. If you are worried about your finances, Citizens Advice Staffordshire South West can give you help about how to avoid starting 2016 in debt.”[/box]
[box type=”info” ]TOP TIPS
1. Spend time shopping around, researching what deals are on offer and getting advice
2. Always look at the total amount you will have to repay when borrowing money. A shorter repayment period may be better than a slightly lower Annual Percentage Rate (APR) amount
3. Never borrow money on the spur of the moment and think about payment options beforehand. Work out your budget and stick to it so that you can afford the repayments
4. Be careful about borrowing more money to pay off existing debts. Additional borrowing can seem like a good idea and may well help in the short-term, but can too often lead to more serious longer-term problems.[/box]
