Get Clever with Credit this Christmas

The OFT has joined forces with financial organisations, money advice agencies and trading standards departments to help 18 to 24 year olds choose the kind of credit that best suits their needs this Christmas.

The OFT’s interactive, web-based campaign Be choosy about credit provides advice, online budget-planners and interest calculators to help give young consumers the skills and tools they need to:

·        be as choosy about how they borrow as how they shop

·        compare the costs of different kinds of borrowing and keep the costs of borrowing as low as possible

·        assess their ability to cope with credit repayments if they were to experience a change in their circumstances, such as losing a job.

The campaign has been developed in response to research from range of sources which illustrates levels of credit and attitudes towards it among young adults.

For both men and women in this age group, access to credit is viewed as a sign of freedom and an affirmation of adulthood; but a survey carried out by Experian suggests that this is also the group most worried about debts over the festive season. Research by the OFT  shows that young men and women have different triggers for spending and the use of credit at Christmas. Men said they were more likely to spend money on nights out with friends and are happy to use a credit card to finance such spending, as it saved them having to carry cash. Women are more likely to spend money on shopping for presents and feel under pressure to buy high-quality presents of equal value for all their family and friends. They also said that ‘panic-buying’ gifts at the last minute was likely to trigger overspending (see note 1). 

According to a survey of clients by the Consumer Credit Counselling Service, young women tend to owe more numerous, smaller debts to store card, credit card and catalogue providers, and their overall debt levels as a proportion of income are rising faster than those of men.  Men tend to have few store card and catalogue debts, but more credit card and personal loan debts, which have larger balances (see note 2).

Responding to a recent survey carried out by Equifax (see note 3), over 30 per cent of young adults said they would be unable to survive financially for a month were they to lose their job; and over 30 per cent of those who described themselves as ‘struggling financially’ blamed job losses.

The OFT will be working in conjunction with its public and private sector partners in the consumer education Alliance (see note 5) to distribute campaign materials and ensure the widest possible reach for the campaign messages. A webchat will also take place on 14 December at www.webchats.tv

John Fingleton, OFT Chief Executive, said:

‘Credit helps consumers spread their commitments over the year. It is of growing importance to young consumers and is already an established part of their financial landscape.  Our campaign aims to give this group the skills they need to budget and be as savvy borrowers as they are shoppers.’

Top tips for managing credit

·        Ask yourself, ‘What’s the best way for me to borrow?’

·        Different types of borrowing include: credit card; personal loan; hire-purchase; current account overdraft; store card; buying goods on credit through a catalogue; interest-free deals directly from a retailer. These can have very different costs

·        Different methods of borrowing suit different people and situations. Make sure you are able to afford the repayments – a personal budget calculator can help you 

·        Shop around for credit deals and make sure you are getting value for money. Use a loan calculator to help you compare how much borrowing at different rates of interest and over different lengths of time can cost you.

Contact: Trading Standards  01343 554617