According to Reuters, "British retail sales growth slowed to its weakest pace in nearly a year in October...suggesting that fragile consumer confidence and higher interest rates are biting in the run up to Christmas."
With personal debt in the UK at an all time high of £1.5 trillion, growing by £1 million every four minutes, according to Credit Action, it's no wonder Britons are showing a bit of retail timidity as the holiday season nears. Higher interest rates leading to higher monthly outgoings in the form of mortgage payments or credit card payments have people in the UK worried about this year's annual holiday spending binge.
A study shows that nearly a quarter of all Britons plan to avoid using their credit cards at all this holiday season. 10 per cent of respondents claim that they plan to get a second job or plan to request a higher salary simply to cover the outstanding debt they are already dealing with. 15 per cent of people in the UK have unsecured debts of £10,000 or more, so people are doing all they can to reduce their spending.
While this newfound consciousness is great for consumers looking to get out of debt, it is very bad for retailers who rely on a heavy influx of spending around this time of year. However, it's not only going to be a rough holiday season for retailers. Bars and restaurants are expected to see a decline in holiday spending as well since 42 per cent of people between the ages of 18-34 plan to reduce their usual amount of entertainment spending during the holiday season.
James Falla of the debt consultancy firm Thomas Charles says that personal debt in the UK has reached a "breaking point." Following years of low interest rates, UK consumers have built up an enormous amount of personal debt. Along with a high cost of living and a desire for a better lifestyle, this large amount of personal debt has pushed many Britons into bankruptcy.
Falla says, "Interest rate rises and subsequent mortgage hikes mean that people have been relying on credit for their everyday expenditure; credit they can often ill afford."
Here are a couple of tips for avoiding common holiday pitfalls that can end up costing you even more money:
- Don't get sucked into credit cards with attractive cash back offers unless you are certain you'll be able to repay the amount owed on the card right away. Some credit card companies are offering up to 5 per cent cash back during the holiday season. If you aren't able to pay off the card immediately, the amount you'll end up paying in interest will soon surpass the amount you'll receive in cash back.
- Avoid store credit cards that offer instant savings on your purchases. These cards are notorious for high interest rates, so again, if you're unable to pay off the card immediately, the amount you'll end up paying in interest will soon negate the savings you received when you opened the card.
- Try saving up for holiday purchases instead of using credit to purchase gifts. Getting into a routine of saving for the holidays will not only help you avoid high interest payments on your purchases, but it is also a good habit to keep throughout the rest of the year. Having a bit of money in a savings account is a nice backup to have.
If you're one of the million of Britons experiencing debt problems, take a moment to fill out our short debt management form, and we will connect you with an experienced debt adviser who will be able to discuss the debt solution that is best for you.