News & Views - Savantor

Spending in the recession

Friday, 16 November 2012

Whilst the UK’s double-dip recession has left many households with little in the way of disposable income it seems to be having other impacts on how we spend and manage our finances. One effect appears to be that people are just avoiding their card bills and bank statements. According to recent Barclays research, the UK is suffering what the bank calls "banxiety" which basically seems to be a fear of bills and statements. In fact, a survey of consumers suggests that 36% of those receiving paper statements and bills are putting off or refusing to open them, and nearly half (45%) are unable to say exactly how much money they have to their name. Apparently 18-to-24-year-olds are the worst offenders, with 55% admitting they are reluctant to open statements. While living in financial denial is never good, it obviously becomes particularly dangerous when it comes to payment cards. Particularly so if you have a card from Zebit who have launched a “prepaid” MasterCard (effectively a short term loan) with a 2012% APR and is encouraging people to go shopping.

The research showed that 30% admitted they have paid for a product or service without knowing if they have enough money or credit to make the payment. Women are slightly more guilty of this than men, with 33% of women having made payment purchase without checking their funds, compared with 28% of men. Given this background one might expect a modest Christmas would be on the cards for many UK households. But research from HSBC suggests the opposite is likely with nearly half of consumers not planning to cut back on their spending at all this festive season and a further 20% estimating a bigger spend this year than last. In fact, only 17% of adults expect to spend less celebrating at the end of 2012 than they did in 2011.

The bank's Christmas Spending Survey indicated that the average consumer intends to spend £526 celebrating Christmas, with £347 set aside for gifts and £179 for food, drink and entertainment. That's only slightly down from 2011, when average spending was £561. While the majority of this spending will be covered by regular income and savings, approximately one in five people anticipate borrowing from typically cards or overdrafts to cover the cost of this festive spend. While 77% of women say they will make attempts at being frugal, just 64% of men say they plan to do so. Men are also slightly more comfortable using a credit card to pay for gifts and food at Christmas, with 15% of men (compared with 11% of women) expecting to use credit and store cards. Hopefully the APR they will pay will be less than the Zebit card.

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